Global Market and Economic Update

Global equity markets delivered strong performance in December, supported by the continuation of the global economic recovery, as the Omicron variant of Covid-19 appears to be resulting in less hospitalisations and deaths than previous variants, despite causing significant disruptions.

Global bond markets battled to come to terms with persistently elevated inflation, with the asset class delivering negative performance for the 2021 calendar year (the first time since 1999) amid concerns of higher interest rates in major developed markets.

The US Federal Reserve (Fed) outlined plans at its December meeting to double the pace at which it tapers asset purchases, which would effectively result in the Fed withdrawing its Covid-19 induced $120 billion per month bond-buying programme more rapidly.  

South African Market Update

South African equities delivered strong performance for December, outperforming other emerging equity markets over the month, supported by the performance of large cap Resource counters in particular.

Local bonds had a strong month, supported by the performance of medium and long dated instruments which recovered significantly post the initial concerns around the Omicron Covid-19 variant.

Local listed property also delivered strong returns, supported by the performance of large index constituents and the continuation of level 1 lockdown restrictions (and some easing of lockdown measures) during December, which proved supportive of sentiment towards the asset class.      

The rand had mixed performance against major developed market currencies over the month, ending largely flat against the US dollar and the euro and slightly lower against the pound sterling.

South African Economic Update

In terms of the Covid-19 pandemic, it appears that SA has passed the peak of the fourth wave of infections, with the government lifting the curfew in place from 12am to 4am, resulting in no further restrictions on the movement of SA citizens.

SA real GDP slumped in Q3 2021 by -1.5% after recording four consecutive quarters of growth, which impacted the recovery that the country has made since the initial Covid-19 induced lockdown in the second quarter of 2020.

SA headline CPI increased to 5.5% year-on-year for November (from 5.0% in October). The increase in headline CPI was largely a result of higher fuel prices, while food prices moderated slightly over the month.

SA’s trade surplus widened in November to R35.8 billion, from a revised surplus in October of R2.7 billion.

Chart of the month: The S&P 500 closed at 70 all-time highs during 2021, the 2^nd most of any year in history (1995 had 77).     

Source: Charlie Bilello

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

• The JSE All Share Index (+4.8%) ended the month higher, supported by strong performance from large cap Resource counters.     
• Local equity sectors all ended the month higher, with Financials (+8.7%), Resources (+5.3%) and Industrials (+2.9%) all delivering strong performance.   
• Listed property (+7.9%) delivered strong performance for the month, supported by the government’s pragmatic approach to lockdown restrictions in reaction to higher Covid-19 cases in December and improved sentiment towards the asset class.           
• Local bonds (+2.7%) ended the month higher, supported by a strong recovery post concerns around the discovery of the Omicron Covid-19 variant, which propelled SA bonds to finish the year as one of the best performing global bond markets.         
• Cash delivered a stable return of +0.3% for the month.
• Most of the major developed equity markets ended the month higher, as concerns around the Omicron Covid-19 variant receded during the month. The MSCI World Index delivered a return of +4.3% for the month.   
• Emerging market equities also delivered positive performance, despite underperforming developed equity markets slightly over the month. The MSCI Emerging Markets Index delivered a return of +1.9% for the month. 
• Most of the major equity markets ended the month in positive territory. The UK’s FTSE 100 (+7.2%), Germany’s FSE DAX (+6.3%), Japan’s Nikkei 225 (+2.2%) and China’s Shanghai SE Composite (+2.1%) all delivered positive performance for the month.
• US equities also delivered positive performance, with the S&P 500 (+4.5%) outperforming the technology heavy NASDAQ 100 (+1.2%) slightly over the month.        
• In terms of the major commodities, Oil (+10.2%) ended the month higher, as demand for brent crude continued to improve as a result of the global economy reopening. Platinum (+1.6%) also ended the month higher, while Gold (+0.1%) ended the month largely flat.
• The rand had mixed performance against the major developed market currencies for the month. The rand was largely flat against the US dollar (+0.4%) and the euro (-0.6%), however, the rand depreciated against the pound sterling (-1.9%) over the month.  

*All data is sourced from Morningstar Direct as at 31/12/2021. The performance of South African asset classes is quoted in rands and the performance of global asset classes is quoted in US dollars.