Local Market Update
- Equities: South African equities showed mixed performance, with a slight decline of -0.9%. Gold stocks in the resource sector performed well, but domestic-focused sectors saw profit-taking after the positive election outcome.
- Bonds: South African bonds underperformed in October, mirroring global bond markets. However, they still outperformed the broader emerging market bond index year-to-date, reflecting cautious optimism around fiscal sustainability.
- Fiscal Outlook: The government’s MTBPS revealed ongoing fiscal challenges, with high debt-to-GDP (75.5%) and significant debt service costs. However, inflation continued its downward trend, reaching 3.8% in September, and economic growth for Q3 is expected at just 0.5%.
Global Market Update
- US Markets: US equities faced declines due to election uncertainty and disappointing earnings reports. GDP growth for Q3 was 2.8%, showing resilience, but inflationary pressures remain a concern.
- Eurozone & UK: European markets also struggled, with the ECB cutting rates by 25bps. The UK saw a selloff in response to the government’s budget announcement, which raised concerns over inflation and long-term rate hikes.
- Asia & Emerging Markets: Japan was a standout performer, driven by exporters benefitting from yen weakness. Meanwhile, emerging markets faced declines, with the US dollar and rising bond yields pressuring equity performance.
- Fixed Income: Global bond markets saw rising yields, with US Treasuries and UK Gilts experiencing selloffs. European sovereign bonds faced similar challenges.
Commodities & Digital Assets
- Commodities: Energy and precious metals performed well, with gold and silver rising due to a weaker dollar. Crude oil prices increased amid geopolitical tensions, while agriculture commodities saw mostly negative performance.
- Digital Assets: Bitcoin hit a new all-time high (+11%), with strong institutional demand, especially for US spot ETFs. Overall, the crypto market rose by 6%, driven by positive sentiment ahead of the US election.
Outlook & Conclusion
Investment Strategy: Given the evolving environment, a diversified portfolio focused on quality assets remains prudent to navigate potential volatility and macroeconomic shifts.
Political & Economic Outlook: With Donald Trump’s re-election, markets are reacting to potential tax cuts, deregulation, and support for domestic industries, particularly in financials, industrials, and energy. However, geopolitical risks and the potential for a more isolationist trade stance create added uncertainty.
Read more below in the Market Watch for October.
Missed last month and need to catch up? Read the September market watch here.
