Feedback on the First Quarter 2024
Interest Rates:
In the US ……
The market is now pricing in a possible three rate cuts this year, down from six cuts.
And locally …..
The SARB’s MPC kept the repo rate unchanged for the 5th consecutive meeting at 8.25%.
A single rate cut is now expected for South Africa this year.
Inflation
- Expectations of interest rate cuts in the US were pushed out after the latest data reflected strong labour markets and sticky inflation.
- In the Eurozone, inflation is slowing. Germany’s inflation rate for January reached its lowest level since June 2021.
- In SA inflation has been trending lower from a peak of 7.8% in July in 2022 to 5.6% in February 2024 which is still above SARS’s inflation target. Forecasts point to lower inflation over the next year. SARB’s commitment is to anchoring inflation expectations at around 4.5%.
Locally The National Budget received a lukewarm response. Uncertainty ahead of the national elections in May created little incentive for investors.
- SA equities rebounded (3.2%) in March due to a strong recovery in the resources sector (15.4%) which has been depressed for the past 14 months.
- SA bonds (-2.0%) were negative amid concerns about South Africa’s fiscal outlook and uncertainty about the election outcome.
Global equities recorded their 5th consecutive positive month in March,
US equities gained on the back of better-than-expected Q4 2023 earnings reports.
UK stocks lagged as data showed the economy moved into a technical recession in Q4 2023 and company earnings disappointed.
Although China’s property sector is still in debt, and economic growth has slowed, investors are pinning their hopes on more decisive government stimulus measures. In February, the Shanghai Composite Index added about 8% in the month.
Source: Sanlam