Monthly Market Update – 01/2021

Monthly Market Update

January overview

South Africa kicked off the new year with a full month of level 3 lockdown restrictions to manage a second surge of Covid-19 cases. By month end, South Africans were eagerly anticipating the arrival of the first batch of 1 million vaccines due to arrive in SA in early February.

In its first meeting of the year, the SARB’s Monetary Policy Committee left the repo rate unchanged at a record-low 3.5%. Towards month end, the International Monetary Fund lowered SA’s economic growth projections. They now expect the South African economy to grow by only 2.8% in 2021 – this is almost a percentage point lower than the Reserve Bank’s updated forecasts of 3.6% GDP growth in 2021.

Conditions in the manufacturing sector ticked up slightly in January. Business activity however, remained under pressure, weighed down by the seven days of load shedding SA had in January, as well as ongoing pandemic restrictions.

Global markets started January full of optimism, extending its bull run. Investors were buoyed by an anticipated fiscal stimulus boost following President Biden’s inauguration and initial optimism around the various Covid-19 vaccine rollout programmes.

The extension of lockdowns was implemented in many European countries as the virus continued to spread. The Japanese government also declared a state of emergency in Tokyo and three surrounding areas.

By the end of January, the United States has vaccinated 10% of the population, while the European Union lagged with <3% of the population vaccinated. In the run up to Biden’s inauguration, a group of Republican supporters stormed the US political headquarters, Capitol Hill.

January was a good month for emerging markets, largely thanks to the Asian countries, particularly China. Emerging markets and riskier asset classes benefited from the surplus of global liquidity, as investors continue to search for yield in a low interest rate environment.

The above information is only for informative purposes and cannot be seen as advice as defined in the Financial Advisory and Intermediary Services Act, 37 of 2002. Although the necessary measures were taken in the preparation of this document, RiG Advisory Services (Pty) Ltd cannot be held responsible for any actions taken as a result of this document. Consult us for personal advice that will be appropriate for your unique circumstances. RiG Advisory Services (Pty) Ltd is an authorised financial services provider (FSP number: 44730).

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