Monthly Market Update – 06/2020

Monthly Market Update

June overview

On the 1st of June, SA moved into level 3 lockdown, which allowed for the reopening of more industries. Markets responded positively and domestic equities posted solid gains for the month. The JSE’s all share index ended the 2nd quarter up over 26%, its strongest rally in 19 years.

Gold prices rallied due to market uncertainty and volatility caused by the pandemic. The precious metal traded at its highest levels in 8 years.

Towards the end of the month, finance Minister Tito Mboweni delivered an emergency budget in parliament which painted a very gloomy picture of the South African economy.

Global equity markets continued down the road to recovery as they delivered a positive monthly performance for the 3rd consecutive month. The S&P 500 Index rose over 20% in the 2nd quarter, its biggest quarterly gain since 1998, regaining nearly all lost ground from the 1st quarter of 2020.

Policymakers continued to intervene in an attempt to counter the negative effects that the COVID-19 pandemic has had on the economies globally. The US Federal Reserve Bank kept interest rates at close to zero.

Emerging markets posted a significant outperformance over developed markets for the month and portfolio inflows into Emerging Markets increased nine-fold in June, with Emerging Asia leading the pack. As yields are currently very supressed in developed markets, investors headed towards riskier assets, such as emerging market shares, in search of higher yields.

Economic indicators show encouraging signs, yet many risks and uncertainties remain looming on the horizon. One of these risks is the potential for fiscal fatigue, particularly in less developed countries, as many governments cannot sustain their extraordinary COVID-related funding much longer. Geopolitical risks also remain as the US-China relationship remains strained.

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