February overview

February started with trials that showed that the AstraZeneca vaccine could be less effective against the new coronavirus strain found in South Africa, causing a delay in the rollout of vaccines in the country. Around mid-month, after the Johnson & Johnson vaccine arrived, government was able to kick off its vaccination campaign.

President Cyril Ramaphosa delivered his fifth State of the Nation Address, laying out a broad recovery program for South Africa. South Africa’s fiscal deficit and substantially high debt remains a cause for concern in terms of the implementation of reforms and economic growth. It estimated that 701 000 people lost their jobs in the fourth quarter of 2020. Finance Minister Tito Mboweni delivered the widely anticipated National Budget Speech on 24 February. Markets responded positively with the rand strengthening and bond yields dropping a few basis points.

Global investors kicked off the month filled with optimism as vaccination rollouts in most developed markets were making good progress. Towards the end of the month however, markets were disrupted by a rapid rally in bond yields. One of the factors contributing to the sudden steepening of the yield curve is concerns around inflationary pressure. With interest rates at record lows, investors are concerned that the central banks have little ammunition left to combat inflation.

Fed Chairman, Jerome Powell has pushed back on this narrative, keeping a dovish stance and making it clear that the Fed will continue with easing measures to help spur economic recovery. Rising inflation expectations broadly supported higher commodity prices in February.

The US Treasury Secretary reiterated her support for the fiscal plan, showing more concern about unemployment than inflation. This month marked one year since the first COVID-driven lockdown orders were initiated in most countries, and despite short term weakness, economic recovery seems to be maintaining its momentum and the brighter growth outlook should support risk-on sentiment throughout 2021.

Disclaimer:
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).