Looking Back at Q3, 2021

The Global view:

Energy prices rose, driven in part by supply constraints administered by OPEC – as well as global demand increasing at higher levels than expected. 

Inflation and interest rates:  Supply chain constraints and higher energy costs mean that it’s likely that inflation will be higher for longer.  Additionally, the US Federal Reserve has indicated that tapering will be imminent, with expectations of a rate hike. The long anticipated rate rises should follow in late 2022.

Developed market equities faced headwinds of slowing growth, supply bottlenecks and fears of hawkish central bank policy.

Notably, iron ore slumped on slowing Chinese growth and there are concerns as to how the real estate concerns (specifically around the potential default of Evergrande, China’s largest property developer) will impact Chinese growth. However, a slowdown has been widely anticipated in China by economists, some of whom are broadly optimistic about China’s ability to avoid a hard landing.

On the local front:

The JSE squeezed out a gain in the third quarter, buoyed by banks, listed property and pharmaceutical stocks.  Resources fell as key industrial and precious metal prices retraced.

A strong USD, falling metal prices and higher energy prices put pressure on the Rand which lost 4% during September, ending the month at USD/ZAR 15.07.

Inflation rose to 4.9% from 4.6% in July; with transport prices making up the bulk of the increase in inflation.  Food inflation also ticked up and is now at its highest rate in over four years.  Both food and transport inflation are likely to remain elevated for the next few months.

Source:  Foord Investments, Ninety One