Mid-May 2021 Economic Review – Moneyweb

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Major asset classes at all levels showed an uptrend during the month due to positive market sentiments emanating from the slow but sure stabilization of the deadly Covid-19, thanks to vaccine deployment programs in several regions of the world.

About 87% of the more than 300 companies that reported financial results during the current period of earnings season, produced profits that exceeded expectations. The Wall Street darlings produced outstanding results for the last quarter, however, that mega-excitement quickly wore off, with most investors voicing their sentiment as to whether any of the known information was already embedded in stock prices. actions displayed.

With a lot of quantitative easing in several economies, inflation fears are quickly mounting, dampening the propelled sentiment of investors. Chip shortages still pose a huge production backlog in several sectors, with automakers being the hardest hit. However, the Biden administration has backed proposals for tax incentives for American manufacturers to manufacture essential parts in America to reduce future shortages.

For the period, developed market equities (MSCI World Index) closed up 4.7% over their emerging market peers (MSCI Emerging Market Index) which posted gains of 2.5%. The S&P 500 Index hit record highs for the period, posting a healthy gain of 5.3%, which is a direct gain over the past three months. This upward spiral is widely accredited with investors who are confident in a positive economic recovery and a return to profitability since the advent of the coronavirus.

The Euro Stoxx 600 Index was another record winner for the month, posting a gain of 4.3%, bringing the year-to-date return to 9.5%. The FTSE / JSE extended its winning streak to six months with a modest 1% gain in April, with the capped SWIX lagging slightly behind showing a marginal gain of 0.8%. The main drivers were financial services which posted an increase of 3.4% and resources by 2.9%.

Yield-driven markets found some amnesty during the month, with the Barclays Bloomberg Global Aggregate Bond Index posting its first positive month this year, up 1.3%. Over the period, eurozone yields rose during the month, following the benchmark 10-year US Treasury yield, which edged up to its highest level in almost two weeks at 1.647% (28 April 2021).

Jerome Powell, US Fed Chairman (at the latest US Federal Reserve policy meeting) reiterated that the easy money will stay for the foreseeable future. The JSE All Bond Index outperformed equities over the month as returns fell on favorable external and internal momentum. The listed properties asset class was the best performing of the month, recording a staggering 11.68%, bringing its year-to-date to 18.86%, largely due to the lack of foreclosure restrictions, which held back activity for much of 2020.

The Bloomberg Commodities Index closed the month up 8.3%, the highest monthly return in nearly a year. This upward push is mainly due to a surge in global economic activity and the easing of restrictions related to the Covid lockdown. Bloomberg’s agricultural index rose 13.4% as several developed countries return to normal.

Gold produced a stellar performance for the month closing 5.93% higher and silver up 11.74%. Cooper continued to show a massive 12-month rally, closing at $ 9,324.82 per tonne for the period, which is an 84.36% change from a year ago. This rally is mainly attributed to the global economic recovery and the growing momentum of green transitions. Oil racked up another month of gains on positive economic data and a better outlook for fuel demand in key markets like the United States, China and the United Kingdom.

The rand broke through R14 / USD since January 2020 to hit R / $ 13.98 on May 10, 2021, thanks to the ongoing rally in commodities. The rand usually benefits from soaring commodity prices, with raw materials accounting for a third of South African exports. Notably, gains on commodities are mainly driven by the global economy which is recovering from pandemic-related lockdowns slapped throughout last year, as China continues to stimulate its appetite for industrial commodities and the US market. preparing for the massive surge in infrastructure investment.

South Africa’s trade data surprised on the upside. The trade surplus increased in February, with exports increasing 16.5% month-on-month, before the marginal increase of 1.5% in imports for the same period, anchoring the idea that global activity in ports has remained strong since the start of the year. Retail sales came out of the dust and rose 6.9% m / m in February after consecutive 10-month declines. However, the manufacturing PMI fell to 56.2 in April from 57.4 in previous months. Headline inflation in March jumped to 3.2% from the 2.9% recorded in February, indicating consensus expectations, falling back into the Sarb target range of 3-6%.

The South African tax service declared an additional R138 billion in tax collection ahead of its initial target for fiscal year 2021. The driving force behind this success is the improvement in the national economy and improved performance. than expected from the mining and financial services sectors.

A selection of the performance of the main asset classes for the period under review:

Total returns as of April 30, 2021
April YTD 1 year 5 years
ALSI-Equity 0.97% 14.23% 36.40% 8.04%
ALSI property 11.68% 18.86% 40.33% -7.37%
ALBI (bonds) 1.90% 0.12% 14.65% 8.66%
STeFI (cash) 0.30% 1.21% 4.34% 6.75%
MSCI World 2.82% 8.45% 14.80% 14.46%
$ / ZAR 1.75% 1.23% 21.00% -0.38%
Euro / ZAR -0.63% 2.83% 13.18% -1.41%
Source: Morningstar (Total annualized returns as of April 30, 2021)
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