Market Summary – April 2021

Global Market and Economic Update

Global equity markets continued to climb higher in April, supported by surprises in terms of positive economic data and company earnings releases. As at the end of April, 87% of S&P 500 companies have posted Q1 2021 earnings which beat estimates, with earnings growing by an average of over 46% year on year.

US President Joe Biden addressed a joint session of Congress during the month, motivating for a $2 trillion infrastructure plan and a newly unveiled $1.8 trillion plan for families, children, and students.

President Biden is proposing that the American Families Plan is largely funded by additional tax of $1.5 trillion on the top 1% of earners as well as increased levies on capital gains and ordinary income for those earning more than $400,000 a year.

The US is expected to reach its pre pandemic level of output midway through 2021, with record stimulus packages and low interest rates providing significant support to aid economic recovery.

The positive moves in global equity markets came despite uneven Covid-19 vaccine distribution across developed and emerging markets, with many key emerging markets struggling to source and distribute vaccines, leading to spiking infection rates in certain countries (particularly India and Brazil).

South African Market Update

South African equities ended higher for a sixth consecutive month, despite poor performance from large industrial counters including Naspers, Prosus and British American Tobacco acting as a headwind to the performance of the local equity index.

Local bonds ended the month higher, supported by a stronger rand over the month and outperforming both aggregate developed and emerging market bond indices.

Local listed property had a strong month, as the asset class continues its recovery amid the local economy returning to more normal levels of activity post the Covid-19 induced lockdown at the beginning of the year.

The rand was largely stronger against most major developed market currencies over the month, receiving continued support from the positive trade balance caused by higher commodity prices and subdued imports.

South African Economic Update

Following weak economic data in January due to the Covid-19 induced restrictions, trade data for February (which was released in April) rebounded strongly. Wholesale and retail trade recorded month on month increases of 1.3% and 6.9%, after falling -0.9% and -2.4% respectively in January.

SA’s trade surplus widened to R52.8 billion in March (from R31.2 billion in February), which is the widest surplus on record and continues to provide significant support to the rand, one of the best performing emerging market currencies year to date.

SA headline CPI moved higher to a year-on-year figure of 3.2% for March (from 2.9% in February). Local inflation continues to surprise on the downside, however, inflation is expected to rise further over the next few months, largely due to base effects and higher international prices.

Chart of the month: The global “reflation trade” continues to be a recurring theme for market participants, with mentions of inflation on earnings calls increasing significantly in the past 12 months.

See below for a summary of the key market movements for the month of April:

  • The JSE All Share Index (+1.0%) ended higher for a sixth consecutive month, largely driven by positive moves in property and resource counters.
  • Local equity sectors had mixed performance for the month, with Resources (+2.9%) and Financials (+1.5%) ending the month higher, while Industrials (-1.2%) ended the month in the red.
  • Listed property (+11.7%) had a strong month, with all index constituents delivering positive performance, as the asset class continues to recover lost ground from the 2020 calendar year.
  • Local bonds (+1.9%) ended the month higher, as the asset class recovered slightly from a difficult first quarter of the year on the back of rising yields amid concerns of increasing medium term inflation expectations.
  • Cash delivered a stable return of +0.3% for the month.
  • Most major developed equity markets ended the month with positive returns, with US equities being the largest contributor to the performance of the index. The MSCI World Index delivered a return of +4.7% for the month.
  • Emerging market equities underperformed developed market equities slightly over the month, however, the asset class still delivered positive performance. The MSCI Emerging Markets Index delivered a return of +2.5% for the month.
  • Most major equity markets ended the month higher, with the UK’s FTSE 100 (+4.5%), Germany’s FSE DAX (+3.3%) and China’s Shanghai SE Composite (+1.4%) ending the month with positive returns. Japan’s Nikkei 225 (-0.2%) ended the month slightly in the red.
  • US equities delivered strong performance for the month, with both the tech heavy NASDAQ 100 (+5.9%) and the S&P 500 (+5.3%) ending the month higher.
  • From a commodity perspective, all major commodities ended the month higher. Gold (+4.5%) and Platinum (+3.1%) both ended the month with positive performance. Oil (+5.8%) finished the month at a six week high, ahead of the US and UK summer season, which is likely to see increased demand for fuel.
  • The rand was largely stronger against most major developed market currencies for the month. The rand appreciated against both the US dollar (+1.8%) and the pound sterling (+1.4%), however, the local unit depreciated against the euro (-0.6%) over the month.

*All data is sourced from Morningstar Direct as at 30/04/2021. The performance of South African asset classes is quoted in rands and the performance of global asset classes is quoted in US dollars.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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