Markets In A Nutshell
World
South Africa
Equities
World
World markets rallied aggressively on buoyant GDP prints and expectations for slowing interest rate increases as inflation peaked — but retraced somewhat in December on more hawkish US Federal Reserve commentary
South Africa
Despite falling in December, equities tracked global bourses higher — brushing aside rand gains to post double-digit returns for the quarter and bring the JSE into positive territory for the year
Bonds
World
US and European bond yields were volatile, but rose latterly on hawkish rhetoric from US Fed Chair Powell — while Japanese bond yields spiked after a surprise BOJ tweak of its yield curve control policy
South Africa
The All Bond Index rallied as yields fell — on the ANC reform camp’s National Elective Conference victories after President Ramaphosa reportedly almost stepped aside on a damning s89 panel report
Currencies
World
The US dollar retraced as the risk of economic recession rose — the greenback’s probable move past peak interest rate differentials strengthened alternative hard currencies
South Africa
The rand gained on improved global risk sentiment and a generally weaker US dollar on post peak interest rate differentials — but faces headwinds as SA’s terms of trade deteriorates
Commodities
World
Industrial commodities weakened on rising economic recession risks and the lagged effect of higher interest rates, while energy prices fell as a mild European winter allowed the bloc to dodge the worst energy crunch predictions — precious metals rose steadily, driven by coincidental peaking of nominal yields and dollar weakness
Economy
World
Inflation receded from recent peaks as the base effects of the Russia/Ukraine war energy and food price shocks abate — but recession risks are rising with the inverted US yield curve at its worst levels since 1980
South Africa
Inflation fell moderately but remains well above the upper end of the 3–6% monetary policy target range — SARB’s forecasts of a return to the 4.5% mid-range level by late 2023 seem overly optimistic
Monetary and fiscal policy
World
The Fed and other leading central banks hiked rates twice more, marking one of the fastest paces of tightening in history — while rates are likely close to their peak, hawkish central bank rhetoric suggests they are likely to stay higher for longer
South Africa
SARB hawkishness continued, with the bank raising rates another 75 basis points in November — bringing the repo rate to 7% from the extraordinarily low pandemic level of 3.5% and probably its peak given the stressed consumer