Monthly Market Update – 06/2021
June saw the onset of the anticipated third wave of COVID-19 infections in South Africa. Due to the much more contagious Delta variant, daily new cases increased at a significantly faster pace. Towards month end, government moved the country to adjusted Level 4 lockdown. The vaccine rollout in SA has been disappointingly slow.
SA continued to report positive terms of trade, with a R54.6bn trade surplus in May, supported by a 1.5% month-on-month increase in exports. Well ahead of expectations, this was the thirteenth consecutive trade surplus and the highest surplus ever recorded in the country’s history.
GDP growth came in stronger than expected for the first quarter. South Africa’s economy grew by an annualised 4.6% quarter-on-quarter in Q1 2021, versus expectations of 3.2%. The severity of the third Covid-19 wave, however, increases the risk that recovery momentum in the SA economy may slow down or even stall in the short term.
Globally, vaccination campaigns continued to accelerate in most developed economies, especially in Europe, which is now catching up with the UK and the US. There are, however, concerns over the spread of the Delta variant and how this would affect the ongoing global economic recovery.
The US Federal Reserve’s 2021 inflation forecasts crept higher to 3.4%, up from its March projection of 2.4%. Most market participants were caught off guard by the Fed signalling that there could likely be two rate hikes by end 2023. This news unsettled the markets.
Consumer confidence is a leading indicator as it can predict consumer spending and June’s improvement came on the back of growing US labour market optimism amid a reopening of the economy, which seems to have also offset inflation concerns somewhat. Financial markets remain supported by very accommodative monetary and fiscal policies and global economic growth is expected to increase at its fastest rate in decades.
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).