Feedback on Q1 2021

It is ironic that the impacts of Covid on the global economy has shifted from being a depressant to a significant stimulus …………………

The immediate response to Covid-19 last year was to lock economies down.   This approach also caused a sharp contraction in economies.  Following this were aggressive and synchronised monetary and fiscal stimuli at an unprecedented level.  

The current global growth is supporting financial assets in ways typical of periods of synchronised global growth.  Massive global liquidity and supply chains disruptions due to Covid-19, are providing a further impetus driving assets to unprecedented levels (e.g agricultural commodities, copper prices, tech stocks, global steel prices and crypto-currencies, are all climbing to record levels).

Whilst vaccination programmes are being rolled out in many developed economies, immunising a world population of over 7 billion people is challenging.   This is probably why we are seeing extensions to excessive monetary and fiscal policies as caution remains despite a rapidly improving economy.

Locally ……………………

  • In April SA stocks recorded a sixth consecutive monthly gain, the longest winning for equities since 2014/2015.  These gains were largely thanks to the diversified miners, which were up over 4% in aggregate as commodity prices rallied. 
  • Property stocks which have had a torrid few years were also up significantly although still below their 2017 highs.
  • the Rand has strengthened significantly since April 2020.   Despite this, the rand remains undervalued against the USD.   This speaks more to the USD remaining relatively expensive against most global currencies. 
  • SA is enjoying one of the most buoyant cycles in decades, reflected clearly in a record trade surplus. 

Source:  Obsidian Capital / Anchor Capital