Investment Market Update
AUGUST 2024
What developments have unfolded in local and global markets throughout the month of August?
154 Days
Consecutively without loadshedding
4.6%
Year on Year SA Inflation
+126%
Nvidea Revenue Growth From 2023 to 2024 (so far)
EMERGING MARKETS VS THE RAND
US DOLLAR VS THE RAND
EMERGING MARKET EXCHANGE RATE VS USD
GLOBAL MARKET
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Global equity markets started August on a rocky note, as weaker-than-expected U.S. job creation, a rise in the unemployment rate, erratic earnings reports from major tech firms, and sluggish manufacturing data contributed to early losses. Geopolitical uncertainties added further pressure to market volatility, which is a normal and recurring phenomenon.
Despite these early disruptions, the bigger picture tells a more resilient story. As the month progressed, weaker inflation data hinted at the possibility of larger and more prolonged interest rate cuts, fueling a risk-on sentiment. This led to a rebound in global equity indices, with many reaching new highs by month’s end.
Examining the performance of major indices in U.S. dollars for August highlights this resilience:
- The S&P 500, representing U.S. large caps, initially fell by 6.1%, but rallied to finish the month up 2.4%.
- The Nasdaq, representing U.S. tech stocks, dropped 7.9%, yet managed a modest gain of 0.7% by month’s end.
- The Russell 2000, representing U.S. small caps, saw a steeper decline of 9.5%, but pared losses to close down just 1.5%.
Meanwhile, political developments also shaped the market outlook, with Kamala Harris officially named the Democratic candidate for U.S. President, polling slightly ahead of Donald Trump as August came to a close.
The Eurozone’s preliminary estimate for consumer price inflation in August indicated a notable decrease toward the target. The annual inflation rate dropped to 2.2%, down 0.4% from July, marking the lowest level since July 2021. Core inflation, which excludes energy, food, alcohol, and tobacco, also fell slightly from 2.9% year-on-year in July to 2.8%.
ANALYTICS AUGUST COMMENTARY:
SMARTIE BOX IN RANDS:
LOCAL MARKETS
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South African bonds and equities continued to benefit from improving foreign sentiment in August, outperforming their emerging market counterparts.
July’s inflation data came in lower than expected, with headline inflation at 4.6% compared to the market consensus of 4.8%, and core inflation slowing to 4.3%, below the 4.5% midpoint. This deceleration occurred a full quarter earlier than forecasted by the South African Reserve Bank (SARB). Attention is now focused on the upcoming Monetary Policy Committee (MPC) meeting in September, where investors are eager to see if the long-anticipated cycle of interest rate cuts will begin.
The rand strengthened further against the US dollar, marking a nearly 6% appreciation over the past three months and outperforming other major emerging market currencies. Meanwhile, oil prices continued to decline, now almost 10% lower than they were a year ago. In contrast, gold hit new record highs, driven by ongoing central bank purchases, with a remarkable 30% gain over the past year.
- The JSE All Share Index closed higher (up 1.4%) for its sixth consecutive month.
- Financials (up 5.3%), Industrials (up 4.0%) performed well while Resources (down 10.1%) struggled due to softer commodity prices.
- Small-caps (up 5.4%), Mid-caps (up 0.4%), and Large-caps (up 1.0%) all ended the month higher.
- The S&P SA REIT sector (up 10.9%) and the SA Listed Property sector (up 8.3%) benefited from positive sentiment and rate cut prospects.
- SA Nominal Bonds (up 2.4%) and Inflation Linked Bonds (up 2.2%) continued their positive momentum.
- Developed Market Equities trounced their Emerging Market peers in US Dollar terms, with the MSCI World Index up 2.7% and the MSCI Emerging Market Index continuing to edge higher, up 1.6%.
- The Rand had a strong month, as sentiment towards South Africa remained positive, and the dollar weakened. Relative to the US Dollar (Rand appreciated 2.4%), the Euro (Rand appreciated 0.2%) and the Pound Sterling (Rand appreciated 0.1%).
- Commodities were a mixed bag in August. Gold (up 2.8%) rose higher, while Platinum (down 5.50%) dropped, and Brent Crude (down 2.4%) continued to weaken.
MONTHLY RETURNS:
