From the desk of our CIO

September 2020

If market levels were the only indicator of economic wellbeing, we would be forgiven for concluding that the global economy was doing well.  Markets are clearly not reflecting the deep contraction felt across the globe during Q2, but rather the tsunami of fiscal and monetary stimulus pumped into economies to prevent a global depression.  Against this backdrop, it is thus no surprise that the recent lack of further US fiscal stimulus coupled with a fast approaching US election has created some market jitters.

Below the surface of index level returns, components of the market such as banking and retail shares have performed considerably worse than technology and resources counters.  The bifurcated nature of returns across sectors is a clear indication of economic stresses being experienced.  Whilst central bankers vow to hold interest rates low for an extend period and inflation remains absent from most economies, we suspect that economic recovery will be uneven in the year ahead. 

SA has been plagued by policy uncertainty and corruption and this has left the government with a debt issue amidst economic growth that has been anemic in the recent past.  While the current government has made the right gestures on these issues, the practical manifestation of their intent remains absent.  If we can make progress in addressing our issues in the next few years, coupled with concrete policy reforms, there is no reason we cannot grow the SA economy at a faster rate than the past decade.  The choices and pathways are completely within our control.