Monthly Market Update – 08/2020

Monthly Market Update

August overview

South Africa moved to level 2 of lockdown on the 18th of August. As a result of the further opening of the economy, both business activity and new sales orders rose in August. The Absa Manufacturing PMI posted a robust increase as it reached 57.3 points in August, up from 51.2 points in July.

While the easing of lockdown restrictions helped lift investor sentiment somewhat, this was largely offset by severe declines in the property and financial sectors as investors reacted to downbeat earnings. The local property market has been structurally weak for some time now. There will always be a need for property in one form or another, however, innovation is essential for the sector in a post-COVID world.

Despite some turbulence during the month, global markets ended August on a high note as positive news of potential COVID-19 treatments and vaccines brought about renewed hope among investors.

On the 18th of August, the S&P500 index reached a new all-time high. The tech-heavy Nasdaq delivered its best monthly performance in two decades as technology stocks continued to outperform, given a more consistent earnings outlook. This is despite many investors’ concerns over the tech sector’s valuations.

Over the past year or so, most big central banks have been reviewing their policy frameworks. The US dollar weakened on the announcement of the Federal Reserve bank’s policy shift.

The US also held trade talks with China, which seemed to indicate that a phase-one trade deal is steadily progressing and going ahead as planned, buoying investor sentiment.

After an all-time low of 26.2 in April, the JP Morgan Global PMI increased from 51 in July to 52.4 in August. While these are certain signs that economic recovery is indeed progressing, the world’s rebound from the pandemic-induced collapse will undoubtedly be shaky and shrouded in uncertainty.

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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