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