Investment Market Update

OCTOBER 2023

What has been happening in local & global markets in the month of October

KEY NUMBERS

5.0%

Peak of the US 10-year treasury yield mid month

-10.4%

SA equity return over last three months


21.4%

1 year USD return on Gold

LOCAL MARKET

_______________________

Local investment returns continued to underperform amid a challenging macroeconomic landscape characterized by elevated interest rates. 

Notably, in the latter part of the month, local bond yields and the domestic currency exhibited resilience, thereby bolstering local bond returns while exerting a dampening effect on global asset class returns. Local equities faced a challenging month, mirroring the broader trend of weakening global equity markets. Furthermore, global property performed the worst, primarily attributable to the appreciation of the South African rand and a decline in hard currency asset prices. 

Headline inflation came in at its highest level in over a year, as the effect of increased petrol and diesel prices showed. Gold and Platinum also rallied hard after months of underperformance.

SMARTIE BOX IN RANDS:

GLOBAL MARKETS

__________________________

It’s been a turbulent time in markets over the last few weeks, with both bonds and equities falling in October and strong economic data in the US proved to be bittersweet, as financial markets continued to struggle over the month.

At the beginning of the month, Hamas militants launched a surprise attack on Israel which drew out a strong response from Israeli defense forces. The Israeli Prime Minister, Benjamin Netanyahu, referred to the attack as an act of war

This had an impact on financial markets as uncertainty rose, bringing about volatility as well as a temporary rise in oil prices around concerns the conflict could widen to larger oil exporting nations.

Elsewhere, in a similar fashion to September, broadly stronger economic news in the US translated into weaker financial market performance globally. The strong growth and employment data releases reinforced market participants’ view of interest rates being higher for longer. This caused bond yields to rise slightly (and hence bond prices to fall) as well as depressing equity markets.  

MOVEMENTS

 

  • The JSE All Share Index dropped for the third consecutive month (down 3.4%).
  • Resources (down 3.2%), Industrials (down 4.5%) and Financials (down 2.0%) all dropped significantly.
  • Small-caps (down 2.3%), Mid-caps (down 3.2%) and Large-caps (down 3.7%) similarly decreased across the board.
  • The S&P SA REIT sector (down 3.3%) and the SA Listed Property sector (down 3.0%) continue to lose ground.
  • SA Nominal Bonds (up 1.7%) were the best performing asset class of the month, while Inflation Linked Bonds (down 0.7%) returned negative performance.
  • Developed Market Equities outperformed their Emerging Market peers in US Dollar terms, with the MSCI World Index down 2.9% and the MSCI Emerging Market Index having dropped 3.9%.
  • The Rand appreciated against the major currencies; relative to the US Dollar (Rand appreciated 0.5%), the Euro (Rand appreciated 0.7%) and the Pound Sterling (Rand appreciated 1.1%).
  • The commodities sector had mixed results in September as metals and oils diverged, Platinum (up 3.3%) and Gold (up 7.4%) added large gains, while  Brent Crude (down 8.3%) fell from monthly highs.

MONTHLY RETURNS: