Looking Back at the Second Quarter, 2021

On the global front…

Equities continued to climb in Q2, with the MSCI World Index up 7.9% in USD. The conditions for risk assets remained supportive, with most economic indicators pointing to strong global growth.

Global property posted another quarter of good gains.
As in previous quarters, central banks kept interest rates broadly unchanged at very low, accommodative levels.
In the US, bullish sentiment was further stoked by the bipartisan approval of a 5-year, USD1.2 trillion infrastructure spending plan. At its June policy meeting, the US Federal Reserve left interest rates unchanged – easing investor concerns over rising inflation, while also signaling two 0.25% interest rate hikes by the end of 2023.
Over in the UK, the rapid spread of the Covid-19 Delta variant – in the face of the country’s successful implementation of its vaccination programme – proved to be a setback for the economy’s anticipated full reopening in June, and dampening market sentiment to some extent.

To local shores…

The JSE All Share Index was flat for the Quarter. However, there was a significant variance of sector returns. The resources sector was down 5%, while domestic sectors had a strong Quarter with retailers and financials up 14% and 8% respectively. The decline in the resources sector should be seen in the context of the strong performance witnessed over the past 12 months (29.6%).
A stronger rand against the USD of 3.3%, combined with an increase in P/E multiples from historically cheap levels, supported the outperformance in domestics.
The South African Reserve Bank (SARB) left the repo rate unchanged at 3.3% in May.
The USD/Rand rallied strongly in Q2 from USD/Rand15.00 at the start of April to a low point of USD/Rand 13.4 in early June, underpinned by strong commodity prices and a surging trade surplus. Notably, concerns about US inflation prompted some sell-off in June, and the currency pair ended the quarter at USD/Rand 14.3.
The property sector maintained its momentum from Q1 2021, delivering a quarterly return of 11.1% for Q2-2021.

Source: Coronation Fund Managers / Prudential Investment Managers / Obsidian Capital