It is pleasing to report that the JSE ALSI Index returned 13.2% for the 6 months to 30 June 2021, outperforming the S&P 500 return of 11.79% and providing the best start to a year since 2007. The Rand strengthened by 2.36% to the US Dollar over the period.  The MSCI AC World Equity Index gained 9.60%, SA Bonds 5%, SA Cash 1.72% while SA Listed Property had the best asset class return of 19.30% over this period.

The US Federal Reserve surprised many market agents at its June policy meeting when it started “talking about talking about” monetary tapering, as Chairman Jerome Powell phrased it. The immediate aftermath of the meeting was a rotation out of risk assets and a surging USD. While the Fed’s message continued to point to an environment of substantial monetary support to the US economy, there were some suggestions that it was turning slightly more cautious over inflationary pressures. It raised its inflation forecasts and acknowledged that inflationary pressures might be more persistent than previously thought. This was also accompanied by an increase in its GDP forecasts and, most notably, a change in its quarterly policy projections.

As things stand, there is reason to believe that both inflationary pressures and constraints to the labour market’s recovery are transitory in nature. As such, the Fed will likely continue to monitor developments on these fronts and gradually prepare global markets for the eventual taper, which is broadly expected to begin at the end of next year.

SA went into lockdown level 4 on 28 June 2021 with various opinions on the timing and effect that it might have. According to Nedbank CIB, the new round of lockdown restrictions could take off about 10bps of growth from the 2021 predicted figures. SA economic activity has improved, but we will need to see how much longer restrictions and increasing Covid infections will limit continued economic growth. We remain optimistic that resources companies listed on the JSE will benefit from global supply/demand dynamics, with a move towards a greener global economy and infrastructure projects in the US and China – this despite an aggressive sell-off in most spot commodity prices post the Fed meeting in June.

SA risk assets still trade cheaper relative to their emerging and developed market peer group. Our equity market is valued 30% below its long-term average and trades at a large discount relative to our Emerging Market and Developed Market peer groups. Our SA Government bonds also remain attractive with real yields above 4%. We watch developments carefully and while we still favor SA and global equities above property, bonds, and cash, we expect a volatile environment for the rest of this year as the global inflationary trajectory, global monetary policy and Covid related restrictions will influence market behavior.


Roeloff Horne

Director and Head of Portfolio Management



The content of this article is for information purposes only and does not constitute an offer or invitation to any person. The opinions expressed are subject to change and are not to be interpreted as investment advice. You should consult an adviser who will be able to provide appropriate advice that is based on your specific needs and circumstances. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable and given in good faith, but no representation is made as to their accuracy, completeness or correctness.

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