Investment Market Update
DECEMBER 2024
What developments have unfolded in local and global markets throughout the month of December?
$557.16 billion
Total amount Americans gave to charitable causes over the year
56%
Of the average Americans holliday budget is allocated to gifts
518 000
Number of visitors arriving at cape town airport in December 2023, with a projected 13% increase in arrivals for December 2024
GLOBAL MARKET
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Global Markets Face Shifts Amid Fed’s Hawkish Tone and China’s Policy Adjustments.
In December, the U.S. Federal Reserve reduced interest rates by 25 basis points to a range of 4.25–4.5% but adopted a hawkish outlook for 2025, signaling a slower pace of future rate cuts. Federal Reserve Chair Jay Powell cited stagnant inflation and a stable labor market as reasons for the shift, with markets now anticipating only two rate cuts in 2025. The announcement triggered declines in global equity and bond markets, with smaller companies seeing steeper losses than their larger counterparts.
The Fed’s decision, coupled with rising U.S. yields and a stronger dollar, has placed pressure on emerging markets. Higher borrowing costs and weakened currencies have complicated debt servicing and reduced purchasing power for these economies.
Meanwhile, China took significant steps to address its slowing economy, changing its monetary policy stance to “moderately loose” from “prudent” for the first time in 14 years. This shift, combined with promises of proactive fiscal measures, buoyed Chinese stocks and bonds in December.
Looking ahead, Donald Trump is set to return to the White House on January 20th, with his “America First” agenda already making waves. In December, his threats of tariffs targeted key U.S. trading partners, including China, the Eurozone, Canada, and Mexico, adding further uncertainty to global markets as the new year begins.
ANALYTICS - DECEMBER COMMENTARY:
SMARTIE BOX IN RANDS:
LOCAL MARKETS
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Emerging Markets Shine in December Amid South African Challenges.
Emerging Market (EM) equities outperformed their Developed Market counterparts in December, capping a strong year for the asset class. While South African equities and bonds lagged their EM peers, they still delivered solid year-on-year returns. The All Bond Index (ALBI) posted a rare negative return in December but ended 2024 with a 17.2% gain, its best annual performance since 2003. Inflation-linked bonds were the weakest domestic asset class, impacted by slowing inflation, poor carry, and rising real yields.
The South African Reserve Bank (SARB) cut interest rates by 25 basis points for the second consecutive meeting, lowering the repo rate to 7.75%. With inflation expected to remain near the lower bound of the 3–6% target range, the SARB has room for further monetary easing in the coming months.
On the energy front, Eskom reconnected the second unit of the Koeberg nuclear power plant to the national grid after extensive refurbishment. This achievement marks nine months of uninterrupted power supply, bolstering business confidence and improving South Africa’s electricity reliability.
The South African rand weakened to 18.9 per USD in December, its lowest level since June, driven by a stronger dollar. Following Donald Trump’s re-election as U.S. president, the rand experienced a significant pullback, ending 2024 down approximately 3% year-to-date.
- The JSE All Share Index declined by 0.3% for the month.
- Industrials saw positive performance (up 2.7%) for the month, while Resources (down 5.4%) and financials (down 1.2%) faced challenges.
- Small-caps (up 3.3%) held up well for the month while Mid-caps (down 1.9%) and Large-caps (down 0.7%) ended the month in the negative.
- Both the S&P SA REIT sector (up 0.5%) and the SA Listed Property sector (up 0.4%) showed some growth over the month.
- SA Nominal Bonds (down 0.3%) recorded a rare negative return in December, marking only the fourth instance of such a decline in the past 24 years. In contrast Inflation Linked Bonds (up 0.8%) saw a modest positive return.
- Developed Market Equities underperformed their Emerging Market peers in US Dollar terms, with the MSCI World Index down 2.6% and the MSCI Emerging Market Index down 0.1%.
- Relative to the US Dollar (Rand depreciated 4.5%), the Euro (Rand depreciated 2.4%) and the Pound Sterling (Rand depreciated 2.9%).
- Commodities prices generally declined in December, except for oil. Gold (down 1.0%), Platinum (down 5.8%) and Brent Crude (up 2.3%).
MONTHLY RETURNS:
