Looking Back at a Volatile Second Quarter
Interest Rates: The SA Reserve Bank left rates unchanged at the May Monetary Policy Committee (MPC) meeting. This decision came after raising interest rates by 75bps since the beginning of the year.
In our view, possible reasons for the pause include growing concern about growth, coupled with a more balanced view of inflation risk. Notably, the Committee mentioned that the pause in rates did not signal the end of the hiking process.
Inflation continued to surprise market watchers on the downside throughout the quarter. Headline (total) Inflation was 6.2% y/y in April, down from the 7% reached in February.
The Rand traded in a range of USD/ZAR 15.7 – 14.7 throughout the period. Global supportive conditions for the Rand were in place, e.g. commodity prices were fairly firm, with the US Federal Reserve not raising rates in the quarter. However, local political uncertainty remained a major source of volatility.
SA consumer confidence remained weak in Q2, and below the level of confidence that prevailed during the global financial market crisis.
Bolstered by increased exports as well as lower imports, the SA trade balance recorded a surplus of R18.7bn in May, which was a lot higher than expected.
Global Equity Markets returned just below 1% for the quarter. Volatility continued to plague the markets with a sharp sell-off in June – with one of the reasons being the UK’s surprise decision to leave the EU.
The US added 287 000 jobs in June which was well ahead of expectations. However, the US Federal Reserve is still expected to be cautious with regards to hiking interest rates.
Source: Coronation Fund Managers / Stanlib / Corion Capital