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Economic and Market Overview

Global

Real global economic growth has tilted up and is approaching the long-term trend of 3.5% per annum, and yet global interest rates remain at depressed levels. At 1.25%, the Federal Reserve’s Fed funds rate is high when measured against its peers (Bank of England’s clearing bank rate at 0.25% and the European Central Bank’s repo rate effectively at 0%). Yet it is by no stretch of the imagination high when measured against historical levels. 

Monetary policymakers, especially outside of the US, are particularly dovish and very careful not to stifle economies with near-term interest rate increases. There are, however, pockets of strong growth around the world – the aggregate real GDP growth of emerging markets averages nearly 5% at the moment. Sadly, South Africa is the worst performing of these markets at around 0.5%.

Recession: Surprise!!

South Africa plunged into its second recession in eight years during the first quarter of 2017. Africa’s most industrialised economy contracted by 0.7% in the first three months of the year after a 0.3% drop at the end of 2016.

2016 in Perspective

For the majority of South African investors, these four numbers represent a year that most are quite happy to see at its end. The proverbial punches started in December 2015 with Nenegate, and in January last year, global financial markets produced their worst start in decades, preceded by a tumbling oil price.  Locally, a sovereign credit ratings downgrade plagued markets as our economy continued to slow down. 

Brexit: Two Weeks Later……

Two weeks after the United Kingdom voted to leave the European Union (EU), the focus of attention is in three different areas: the political turmoil that has erupted in UK politics, the widespread speculation about the response of the remaining members of the EU and the reaction of global equity, bond and currency markets. 

Picking Up the Pieces

The Zuma Policy Error

The policy error made by President Jacob Zuma in December last year, when he fired Finance Minister Nene and replaced him with unknown Desmond van Rooyen, is still priced into our investment markets.