Markets in a nutshell
WORLD
EQUITIES
A few giant US tech stocks pushed US bourses to their most expensive levels since the tech bubble in 2000—emerging markets seesawed as high yields, demographics and natural resource endowments simultaneously signalled reward and danger
BONDS
Developed market bond yields hovered at irrational lows on unrelenting central bank stimulus—markets briefly reflected rising inflation risks after the US Federal Reserve changed its policy to target average inflation
CURRENCIES
US dollar weakness should persist—but precious metals and even cryptocurrencies should stay well bid amid growing fiat currency risks
COMMODITIES
Precious metals gold and silver rose further on US dollar weakness and continued monetary and fiscal largesse—while Brent crude stabilised around $40/bbl on anaemic demand
ECONOMY
Economic activity rebounded after historic second-quarter contraction as lockdowns eased—but recession risks persist given high unemployment, resurgent coronavirus and expiring fiscal stimulus
MONETARY AND FISCAL POLICY
Rising sovereign debt levels, pervasive experimental monetary (and now) fiscal policy supported markets—but the US elections, geopolitical tension and second-wave infection rates are material risks
SOUTH AFRICA
EQUITIES
SA equities advanced marginally, led by resources stocks while industrials and financial counters lagged—the managers are cautious despite optically attractive South African equity and listed property valuations
BONDS
The SA government bond yield curve steepened after SARB’s repo rate cuts—with the longer end of the curve still availing high real yields under current inflation forecasts
CURRENCIES
The rand was volatile given internal and exogenous shocks but ended slightly stronger against a weaker dollar—emerging market currencies should enjoy tailwinds from material increases in hard currency money supply
COMMODITIES
Precious metals gold and silver rose further on US dollar weakness and continued monetary and fiscal largesse—while Brent crude stabilised around $40/bbl on anaemic demand
ECONOMY
The SA economy contracted a record 16% in the second quarter and unemployment rose by 2.8 million people due to COVID-19 lockdowns—employment recovery will be slow given the dearth of fixed investment opportunities
MONETARY AND FISCAL POLICY
Finance Minister Mboweni’s supplementary budget stressed the rising risk of a full-blown debt spiral if government does not cut expenditure—given the growth vacuum and growing budgetary share of debt funding costs