Jamaicans can be excused for feeling a little bit jaded over the past couple of weeks regarding the information and views coming out from the BOJ and the PIOJ regarding the economy. On November 16, the Bank of Jamaica governor as stated that the economy grew between zero and one per cent in the third quarter, down from an average closer to two per cent in the first two quarters. The PIOJ then confirmed this with a more precise figure of 0.6 per cent at its quarterly briefing on the economy on November 22 Despite this downward trend both institutions expect to see growth in the fourth quarter, anemic though it may be.

Turning the ship around in Jamaica is a challenging task, as the conditions which we need to foster; stable dollar, low inflation, low unemployment rate, low interest rates, a robust NIR, increasing local and foreign direct investment, a manageable debt to GDP ratio (preferably below 70 per cent for starters) have proven to be elusive as a whole. We have at different times in our 50 years of independence been able to excel in one or two for short periods, but have been at best mediocre in achieving these targets as a whole, and as such our economic performance continues to be generally mediocre, with only occasional bright spots.

What we have also seen is that the Demand for Jamaica’s Goods and services internationally has over the years proven consistently to be inelastic. In such a scenario, dollar devaluation does not help your competitiveness; on the contrary, it tends to diminish it. In Jamaica, both local and overseas investors tend to favour exchange rate stability above devaluation as it gives them an increase ability to plan and forecast with greater accuracy. In fact, Economic growth in Jamaica is at its best when the dollar has remained relatively stable.

We all know the Jamaican dollar is overvalued, but so are the currencies of most of our English speaking Caribbean neighbours. Despite their overvalued currency, they have been able to develop in a somewhat more consistent manner than us here in Jamaica. At the end of the day however, we as country are faced with increasingly challenging times ahead, maybe we should again look at dollarisation.

I segue now to what the forward thinking investor should look at doing in the year to come and beyond to protect and grow his investments. Many of us who are employed are a part of a company pension scheme, while the self-employed have been using the IRA (Individual Retirement Account) avenue to save for retirement, and in so doing may believe they are securing their post retirement lifestyle. The Stark reality however is that if you depend on your pension alone to sustain you during retirement, you will suffer. Pension funds by law (Bank of Jamaica Act) are required to hold the majority of their assets 95 per cent in Jamaican currency investments. In addition to this pension fund performance rates over the past five years have seen mostly single digit growth, and in some cases loss, while inflation and exchange rate depreciation run on at double digit rates. Currently point to point inflation from the latest Statin report puts inflation at 10.1 per cent, and the Jamaica dollar has depreciated by 17 per cent thus far this year. Additionally some pension funds are not as heavy in equities as they should be, equities long term, has been one of the few asset classes to beat inflation over the years.

As such if any individual that seeks to prepare adequately for retirement, they must make additional investments, separate from their pension contributions with a significant, if not majority portion of it in hard currency, and by that I mean the US dollar, the GBP (pound sterling) and the Euro, anything else is suicide, and a recipe for a post retirement life seeing a significant drop in standard of living.

With a long term view in mind, and by long term, I mean ten years down the road; those seeking to secure their retirement should look closely at the opportunities that are present now regarding US Equities and US dollar Denominated bonds for their supplemental retirement investment. In the case of US Equities, they have been doing particularly well over the past two years, and some say may be due for a pullback. However, with the “fracking” revolution giving the US access again to cheaper energy for some time, coupled with positive developments between the west and Iran over its nuclear program sending energy prices further down, the American economy may be in for a significant uptick over the next two to three years. That would be good news for US companies, and thus good news for their stock markets. This would also be bolstered if the eventual fed tapering takes place smoothly.

Additionally, emerging market and corporate US dollar denominated bonds are still at sub May 2013 levels, and trading at what I like to call the “Bernanke” discount level. I believe in the next two years these markets will be trading back at normal levels. If one believes in the principle of buying low, so as to sell high later, one has to take advantage of the opportunity to buy low when lower prices exist. Also important to note is that the opportunity to buy low usually comes when the market’s assessment of that securities risk goes up, which is currently the case for those bonds. Fortunately, when you are looking to invest for the long term, particularly towards a retirement goal, time is on your side, and once you choose solid investments, you are likely to be smiling when black hair follicles turn to grey, or are replaced by shiny skin.

Kevin Jones is the manager of the wealth division at Stocks & Securities Ltd. Contact: kjones@sslinvest.com