So, what happened in the 3rd quarter that you should know about?
Firstly, the SA Reserve Bank Monetary Policy Committee (MPC) raised rates in July by 25bps to 6%. At the time, there was a deterioration in the inflation forecasts – and the weaker currency posed an upside risk to this forecast.
In September, the MPC left rates unchanged, with weaker growth and lower oil prices affecting the decision. However, the MPC is expected to raise rates at a moderate pace through 2016.
The rand weakened substantially during this quarter, trading between R12.60 and a peak of over R14 to the US Dollar. The resurgent US Dollar, renewed weakness in commodity prices and concerns about the growth prospects in emerging markets (China in particular) were key factors.
In SA, Financials declined by -1.1% for the quarter; Industrials gave a return of 0.8% and Resources returned -17.9% for the quarter.
Global markets performed poorly in the quarter with the MSCI World Index down -8.3%.
Growth in the US was stronger than previously calculated and unemployment fell to its lowest level since April 2008.
In September, we saw a continuation of worries about growth in China and speculation around when the US Federal Reserve will raise interest rates for the first time in years. The Federal Reserve decided to keep rates on hold, citing concerns about global economic growth and volatile financial markets. These stated concerns made investors nervous and most stock markets fell as a result…
Source: Coronation Fund Managers / Brandon Zietsman, PortfolioMetrix (Pty) Ltd