Monthly Market Update – 11/2020
November saw huge uproar in the local investment industry. This was caused by a circular issued by the South African Reserve Bank that announced changes in exchange control regulations. After a week of much speculation and confusion among investors, treasury suspended the circular.
At its last Monetary Policy Committee meeting for the year, the Reserve Bank indicated that the rates cutting cycle has come to a halt and left the repo-rate unchanged for the second consecutive time. The Reserve Bank revised its inflation and growth forecasts for the better.
During the month, two of the three major rating agencies, Moody’s and Fitch, pushed SA’s credit rating one notch deeper into junk. SA business confidence jumped to the highest level in more than 2 years in the fourth quarter. The BER Business Confidence Index rose to 40 from an all-time low of 5 in Q2. This encouraging uptick in business mood could be dampened by the concerning increase in new COVID-19 cases in SA.
November started with a highly contested US Presidential election. It appears certain that Biden has emerged victorious, leaving Trump to be just the tenth president in US history that fails to win a second term.
Markets were surprised with more good news as Pfizer announced that it’s COVID-19 vaccine had shown a more than 90% effectiveness in preventing COVID-19 infections. Throughout the month, COVID-19 infections reached record levels. This however did not dampen investor optimism. Value stocks led the gains in November. Third-quarter earnings continued to impress in November, while economic data was mixed. Manufacturing and Services data in the US were also better than expected.
The Dow Jones Industrial Average, which has lagged much of the year, hit record high levels during the month and crossed the 30 000 mark for the first time in history.
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