South Africa Outperforms Globally
South Africa’s economy has shown remarkable resilience amidst a challenging global landscape. This post delves into the factors driving local market performance while also providing a comprehensive overview of global economic trends and their implications for South African investors.
Local Commentary
South African assets have outperformed global counterparts amid a slowing global economy. Local equities, particularly interest-rate sensitive sectors like consumer staples, banks, and financials, have seen strong gains. This is partly due to improved investor sentiment post-elections and the unlocking of discounted valuations. Bonds also performed well but may require stronger government performance to sustain yield declines. The SARB held interest rates steady but hinted at a potential September cut, supported by slowing inflation. Economic data was mixed, but the outlook remains positive due to expected rate cuts and government reforms.
Offshore Commentary
Global markets experienced volatility in July. US equities saw modest gains, driven by strong earnings but overshadowed by tech sector weakness. Small-cap stocks outperformed due to anticipated Fed rate cuts. European and Japanese equities underperformed, impacted by economic concerns and currency fluctuations. UK stocks rose on improved economic data.
Commodities were mixed, with gold benefiting from safe-haven demand and lower inflation expectations, while oil prices declined. Bonds rallied globally on rate cut expectations, with US Treasuries leading gains. Credit markets favoured investment-grade bonds over high-yield.
Overall, while rate cuts are expected, their magnitude remains uncertain. A focus on regionally diversified portfolios, including UK, China, and continental Europe, is recommended to mitigate US market risks.
Read more below in the Market Watch for July.
Missed last month and need to catch up? Read the June market watch here.
