The month of July 2024 was marked by significant political events in the global space and more risk-on behaviour in the local market. Central Bank policies were at the forefront, with key meetings held by the US Federal Reserve (Fed), European Central Bank (ECB), and Bank of Japan (BoJ). The Fed’s indications regarding potential interest rate cuts amid cooling inflation were particularly impactful, although the first cut is only expected in September. The ECB maintained its policy stance with further easing anticipated in September, while the BoJ signalled a move towards normalizing borrowing costs, which could have a massive impact on the US market.
US labour market data indicated a sharp slowdown, which contributed to investor speculation about future Fed actions. This data, along with corporate earnings reports, drove significant market movements. In Europe, economic indicators and political events, such as the French snap election, influenced regional markets, particularly affecting the Euro and European stocks.
In terms of equity performance, global equities, as measured by the MSCI World Index, rose by 1.76% (USD) in July. This increase was driven by strong corporate earnings, especially in the technology and consumer sectors in the US, and robust performance in the industrial and financial sectors in Europe. Conversely, the MSCI Emerging Markets Index experienced only a slight pick-up of 0.3%, reflecting geopolitical tensions and mixed economic data in these regions.
One significant geopolitical event was the assassination attempt on former President Donald Trump on July 13, 2024, during a campaign rally in Pennsylvania. Although Trump sustained only a minor injury, the incident led to notable market reactions. Trump’s support surged, increasing his probability of winning the upcoming election, which in turn caused market volatility. Investors flocked to safe-haven assets such as gold, and there were shifts in US Treasury yields. Stocks related to Trump’s media ventures and gun manufacturers saw significant gains as the market reacted to the heightened political uncertainty and potential changes in policy outlook.
Our overweight exposure to global risk assets meant that some of our funds (in the multi asset space) lagged the industry average when compared to peers. Our view is to keep our Strategic Asset Allocation but could take some profit if we feel that developed market economic factors are turning south resulting in recessionary pressures.
In South Africa, July 2024 was characterized mostly by global events as well as our own political landscape looking surprisingly optimistic. The FTSE JSE All Share Index ended the month up 3.92% in July contributing to a 9.2% return for the last three months. This was mostly because of optimism surrounding the newly formed Government of National Unity (or GNU) and the positive impact it could have on our economic situation. This meant that foreign investors started to dip their toes back into our market with foreign investment ending net positive for the first time in a very long cycle.
Our portfolios benefited from the local optimism as we remained overweight local risk assets for the month of July. This might lead to profit taking if we see evidence of a pull back, but for now we remain overweight local risk assets.
Jacques de Kock
Quantitative Analyst & Portfolio Manager
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