The big news in November was the result of the US election. Although the polls indicated a close call, the result was more in line with the bookies’ prediction. Donald Trump and the Republicans swept through the US, claiming the presidency with ease. The flip states gave the majority to Trump, who will serve his second term from 20 January, where we believe he will hit the tar running.
Source: Associated Press
US Stocks had their best week in a year, in a rally sparked by Donald Trump’s election victory. The S&P 500 broke through 6000 peaking at 6012.45, for the first time. After the initial rush, volatility eased again as fundamentals took over from emotion. The re-election of Trump has supported the dollar against most currencies.
Source: www.plus500.com
The latest U.S. CPI report showed a slight rise in inflation, with core inflation holding steady at 4.1%. This added fuel to concerns that the U.S. Federal Reserve may have to maintain higher interest rates for longer, which could dampen global growth prospects and affect emerging markets like South Africa. The annual inflation rate in the US accelerated to 2.6% in October 2024, up from 2.4% in September which was the lowest rate since February 2021, and in line with market expectations.
Jerome Powell stated that the US Central bank does not need to rush to lower interest rates and rather do so “deliberately and carefully”, thanks to the ongoing economic growth, solid job market and inflation that remains above the 2% target. Fed funds futures are pricing in a 65% probability of a December cut, but just 32% probability of another cut in January.
US GDP held up at 2.8% vs expected +2.9% and is still viewed as a solid number. However, the jobs report disappointed:12k vs estimates of 100k. Private payrolls weren’t any better with multiple hurricanes and the Boeing strike impacting this. Bond yields moved sharply higher on the back of this, and bond market selling has been relentless.
Europe and UK
In the UK, the BOE also cut rates by 0.25%to 4.75%, but projected a higher inflation after Rachel Reeves’ first budget speech, with its heavy borrowing and spending. He delivered a budget that will cause the state to grow to a size not seen outside of emergency or war.
European leaders met at the Budapest summit to discuss possible US tariffs, which could have a huge economic impact. Theay also discussed migration, Ukraine, and changes in the White House which could determine the course of the wars.
China
China GDP came in at 4.6%. Better-than-expected retail sales figures in September, likely boosted by government subsidies for buying home appliances, saw a 21% surge in sales from a year ago.
China has announced a $1.4tn stimulus package to bail out local governments and help shore up its faltering economy, as it braces for increased trade tensions with the US. It attempts to ease local government financing strains and stabilise flagging economic growth, as it faces fresh pressure from the re-election of Donald Trump as U.S. president. They aim to repair municipal balance sheets as a longer-term objective, rather than directly inject money into the economy. It is highly expected that a trade war with the US may happen, which will be to the detriment of most economies, including SA. The Hang Seng 300 index immediately spiked after the news.
Source: Financial Times
At COP29 in Azerbaijan, the usual climate rhetoric met a surprising twist. Attendance dropped sharply, major nations stayed away, and the host nation, led by President Ilham Aliyev, openly defended its fossil fuel economy. With growing rebellion against expensive renewables and Net Zero goals, the conference underscored a shifting global perspective. All this while natural disasters are increasing…
Emerging Markets
Monetary policy easing by the U.S. Federal Reserve, as long as it is accompanied by an orderly softening of the U.S. economy, is a positive for emerging markets (EMs)--especially ones with strong economic fundamentals, such as those in Southeast Asia. South Africa is accelerating, albeit still at below trend levels.
Source: NinetyOne
South Africa
The global credit rating agency, S&P, revised SA’s credit outlook to positive from stable and affirmed the sovereign long-term foreign and local currency debt ratings at ‘BB-’ and ‘BB’, respectively. The positive outlook reflects the agency’s view that increased political stability following the May 2024 general elections and impetus for reform could boost private investment and GDP growth.
The SARB’s monetary policy committee (MPC) voted to cut interest rates by 25 basis points to 7.75% on Thursday, noting the recent slowdown in inflation but warning that the risk outlook required a cautious approach. This also brings the prime lending rate down by 0.25 percentage points to 11.25%.
Source: Momentum Investments
South Africa’s annual inflation rate fell for the 5th straight month in October, hitting a near four-year low of 2.8%, down from 3.8% in the prior month. Figures came slightly below market forecasts of 3.1%. This is extremely good news. Falling fuel prices remain the primary factor behind the slowdown. Petrol and diesel prices declined by 5.3% between September and October, taking the annual rate for fuel to -19.1%. The inflation rate in South Africa is expected to be 4.50% by the end of this quarter. In the long-term, the South African inflation rate is projected to trend around 4.0% in 2025 and 4.60 percent in 2026.
Source: Trading Economics
Reserve Bank Governor Lesetja Kganyago revealed that the review of the 3% to 6% inflation target is nearing completion, with final discussions underway with the Treasury, though no timeline has been set. The target, unchanged since 2000, aims to anchor inflation expectations at its midpoint.
National Treasury dropped some unsettling hints, including talk of a “wealth tax” and potential changes to the tax treatment of Collective Investment Schemes (CIS). The latter is open for commentary and the industry is preparing counter arguments. It will imply that investments in unit trusts will be taxed more harshly, which the industry believes might lead to even worse saving levels in South Africa. This is not the first time SARS has considered getting more taxes from the industry.
Business sentiment, measured by the Rand Merchant Bank (RMB)/Bureau for Economic Research (BER) business confidence index (BCI) improved to 45 index points in the fourth quarter of 2024 from 38 in the third quarter. Sentiment improved across all the sub-sectors (building contractors, manufacturers, retailers and wholesalers), except for new vehicle dealers, who are more sensitive to high interest rates. Manufacturers no longer view the political climate as the biggest constraint to current activity. This follows the formation of the government of national unity (GNU) and bodes well for future fixed investment activity.
Source: Momentum Investments
Most of the South African indicators are extremely positive and as a result most fund managers are positive about local asset classes. Some of the stock on the S&P 500 are in expensive territory, so fund managers tend to be slightly overweight SA stock to offshore stock, with emerging markets seeming to be quite cheap.
Snippets from the market
Satellite imagery suggests that UN sanctions have been defied and Russia supplied North Korea with more than 1 million barrels of oil this year, over eight months.
There are speculations that North Korea uses its involvement with Russia as an opportunity to get battle experience. This might signal a preparation for war with the south.
SARS has announced that withdrawals from Two-Pot retirement system have increased to more than R35 billion from more than 1.9 million applications
South African food inflation has been cooling, but things could heat up again soon. Domestic futures prices for the staple white maize in the week of 18 November scaled record highs above R6,300 a tonne, a scorching rise in the year to date of about 60%.
$20.5 decillion - Russia fined Google $20.5 decillion over YouTube content. The number reported is equivalent to all the money on Earth multiplied by 23,809,523.
$50 billion - TikTok co-founder Zhang Yiming is now the richest person in China, worth nearly $50 billion.
$3.39 trillion- Nvidia briefly surpassed Apple’s market cap, making it the largest company globally at $3.39 trillion.
The government has declared the massive wave of food poisoning, with 890 reported cases that has killed more than 20 people and left nearly 900 ill, as a national disaster.
The G20 annual presidency was officially handed to South Africa in a ceremony in Rio de Janeiro. It is the first time the year-long programme of the bloc will be hosted on the African continent.
Police Minister Senzo Mchunu and Public Works Minister Dean Macpherson attended Tuesday’s inaugural national summit in Durban for crime-free construction sites and hailed the Durban Declaration as a historic commitment to confront the construction mafia.
The Department of Human Settlements is reviewing legislation on the illegal occupation of land and houses in South Africa, as part of its strategy to address the rise in illegally occupied spaces.
Key financial investigators are leaving the National Prosecuting Authority because of low pay and joining the private sector and the Special Investigating Unit, where the salary ranges are almost double what the NPA pays.
The Home Affairs Department has dismissed 18 officials, effective immediately, for a range of offences, including fraud, corruption, and sexual harassment.
The Special Investigating Unit has filed an application to reverse the awarding of a multi-million-rand tender to former African National Congress spokesperson Pule Mabe’s company.
South Africa’s largest money manager, NinetyOne, is poised to solidify its market-leading position with a proposed acquisition of Sanlam Investment Management for about R5 billion.
The Karpowership project for emergency power had been terminated and was no longer an option. However, the plan to include small modular reactors in the energy mix was still alive as envisioned in the Integrated Resource Plan of 2019.
Eskom also reached 242 days without loadshedding, a promising sign of progress.
An experimental pill developed by Eli Lilly LLY.N dramatically lowered an inherited form of high cholesterol in a mid-stage trial.
Three months after joining Jacob Zuma’s uMkhonto weSizwe Party, Floyd Shivambu has been appointed secretary-general of the MK party.
More than R17 billion has been spent by South Africa on importing solar panels, inverters, and lithium-ion batteries in the first nine months of this year.
Russia fired an experimental missile at Ukraine after the firing of US and UK-made long-range missiles into Russian territory.
The International Criminal Court issued warrants of arrest for Benjamin Netanyahu and Yoav Gallant, for crimes against humanity and war crimes in the State of Palestine.
Germany’s defence minister Boris Pistorius has promised that Europe will step up to assist Ukraine.
The US Justice Department has moved to drop the 2020 obstruction case relating to Donald Trump. The department is prevented from pursuing prosecution against a sitting president, effectively forcing them to unwind proceedings. The charges can be re-imposed after Trump’s presidency.
Meta, TikTok and Google have all criticised an impending Australian bill banning social media for children under age 16.
President-elect Trump dropped a tariff bombshell on China, Canada and Mexico, causing the Canadian dollar to fall to a four-year low as stocks stumbled. Trump’s tariff talk left markets jittery, proving yet again he’s running the show — and keeping everyone guessing.
Russia’s largest drone attack on Ukraine has hit power grids and homes, leaving parts of the western region without electricity.
In 2023 total investment in the country amounted to just over R1 trillion. Total GDP was just over R7 trillion, which means investment came to 15% of GDP.
Joe Biden gives a presidential pardon to his son Hunter Biden.
Source: Glacier Invest
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