Monthly Market Update – 12/2020
At the beginning of December Health Minister Dr Zweli Mkhize announced that South Africa was now officially experiencing a second wave of Covid-19 infections. South Africa ended the year with more than 1 million coronavirus infections and 30 000 deaths.
However, despite the imposition of tighter lockdown conditions, local investors seemed to remain optimistic and hopeful that we will see some measure of return to normality in 2021. The upbeat global backdrop also propped up the local market and helped the local bourse to end in positive territory for the year.
SA’s economic activity continued to recover and the BER Consumer Confidence Index (CCI) improved. On the other hand, Absa’s Purchasing Managers’ Index (PMI) declined further. Eskom also briefly implemented stage 2 load shedding towards month end, supposedly in an effort to ensure that the power utility will meet demand in January when economic activity resumes.
After seeing one of the sharpest bear markets in modern history, global markets ended the exceptionally turbulent year on a buoyant note. Global financial markets, however, still recorded strong returns in December. This was spurred on by the rollout of multiple Covid-19 vaccines and extremely accommodative monetary and fiscal policies in many countries.
After 4 years of negotiations and missed deadlines, the UK sealed a historic post-Brexit trade deal with the European Union on Christmas Eve. The finalisation of the deal improved investor sentiment and brought some strength to the pound.
Another sentiment booster was the US Congress’ agreement on a stimulus package worth nearly $900bn. Despite stronger growth and higher spending, the central bank reassured markets that rates will be kept at the current low levels until the economy has recovered.
The key area of focus in 2021 will be how soon the large population can be vaccinated to help economies reopen and normalise.
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