December overview

The local market ended 2021 strongly as concerns around the Omicron COVID-19 variant receded. Based on Google mobility trackers, the fourth wave did not seem to adversely impact mobility over the holiday period. This bodes well for a recovery in real GDP during the fourth quarter of 2021 from a notable Q3 contraction.

Q3 GDP came in at a disappointing 2.9% year-on-year, well below expectations of 3.8% year-on-year, and still below pre-pandemic levels with current economic output at levels similar to 2016. The setback is largely attributed to the looting in July, loadshedding, job losses, and the stricter lockdown measures which were in place.

In more positive news, Fitch Ratings unexpectedly upgraded its outlook on South Africa’s credit rating, providing some relief to the nation. South Africa saw a year-to-date trade balance surplus of R412.51 billion, from a surplus of R238.42 billion in the same period in 2020. This was largely due to booming commodity prices, which pushed up the value of mining exports.

As with the local market, global markets bounced back in December from a weak November. Strong earnings growth also drove equities higher. For the 2021 calendar year, Energy, Real Estate, Technology and Financial Services were the best performing sectors. US corporate earnings released in December were particularly impressive. Corporate profits rose 3.4% in the third quarter of 2021 to a fresh record high of $2.52 trillion.

In response to persistently high inflation, the Federal Reserve signalled a faster pace of rate hikes in the coming year, while the European Central Bank’s president on the other hand stated that a rate increase in 2022 was “very unlikely.”

Most commodities saw a massive recovery during December as investors became more optimistic on the continuation of the ongoing economic rebound. Iron Ore appreciated 18.3%, Oil was up 12.4% and Palladium increased by 9.4%. The US dollar weakened over the month against major developed and emerging market currencies.

Disclaimer:

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).