The tide is turning for shares.

When the USA started their quantitative easing program, shares throughout the word started rising at a dizzying pace. To give you an idea, look at the following figures:

• S&P500 index in the USA went up 40% in $ terms over the last 20 months
• All Share index in South Africa went up 32% in Rand terms over the last 20 months

And this is only over the last 20 months! Before that we had a good 2009, 2010 and 2012. In short we have been enjoying a 5 year party as far as equity returns go and it was all funded by low interest rates.

Now the tide is turning and interest rates in the USA will start going up in the not too distant future and many emerging economies like South Africa have already started increasing interest rates. If you have ever wondered what the trigger will be for the party to come to an end, then this is it!

For the USA the effect will be that share prices will come under pressure as free money find its way to interest bearing products or even just to reduce debt and in South Africa the effect will be even worse with international investors selling their SA shares, converting the Rands into US$ to take back home which will put further pressure on the Rand to weaken.

So what do we do?

Firstly, if you haven't invested in equities over the last 5 years then sorry, you have missed the boat. Secondly, investing in passive equity products like index trackers might be the wrong thing to do. In a world where the trend is down, you have to apply your mind and analyze the individual companies to determine the value at the current price.

For South African investors the benefit of investing in companies that earn the majority of its income abroad will be the Rand hedge quality of the share (as the Rand depreciates).

To sum up:

• The party is over, you will have to work for your return.
• Cash is king over short term but poison over 5 years plus term. You can not time the market!
• Don't be shy to invest offshore or in CHEAP Rand hedge shares if you are a South African investor.
• If you have participated in the stellar returns of equities over the lat 5 years and your short term funds have been depleted, re-balance your portfolio by taking some profits and building up your cash buffer.

I can see a carefully selected equity portfolio outperforming cash and beating inflation over the next 5 years but what about the next 2 years? I don't know but DON'T BE GREEDY!!