Taking a Brief Look Back at 2022….

QUARTER 1 (Q1)

Importantly, Central Banks started to raise interest rates to curb global inflation.  

The War in Ukraine triggered a negative supply shock to a global economy already struggling with supply-side shortages due to the pandemic … thereby reducing growth and further increasing inflation.

Notably, the MSCI World Index fell 5.2% in USD terms. 

On the local front:

• Equities showed resilience, with the FTSE/JSE All Share Index returning 3.8% for Q1. 
• The Rand gained 8.3% against the USD for the Quarter.

QUARTER 2 (Q2)

Overall, Inflation proved to be more stubborn and persistent than major central banks initially thought.

In June, the US Federal Reserve announced its biggest interest rate hike in almost 30 years.  

Global stocks extended a sell-off as investors feared that the rate increases could put the brakes on economic growth if they became too aggressive.

Overall, the MSCI World Index lost 16.2% in USD terms.  Growth concerns around, for one, China’s Zero Covid policies, triggered further selling, resulting in the MSCI Emerging Market Index losing 11.4%.

On home soil:

• The SARB raised its benchmark repo rate to 4.75% at its May 2022 meeting.
• The ALSI lost 11.7%.

QUARTER 3 (Q3)

Critically, Interest rates continued to rise.

Following 6 months of war in Ukraine, natural gas prices hit a record high, helping to drive up inflation that was in turn driving more interest rate hikes and exacerbating the risk of recession.

Global stocks remained under pressure during Q3.  News about high inflation, the energy crisis in Europe, the ongoing war in Ukraine and currency volatility all contributed to the uncertainty in financial markets. 

The MSCI World Index dropped another 6.2% in USD.  

The MSCI Emerging Markets Index lost 11.6% with the CSI Index of China down 15% in the quarter as investors contended with stringent Covid curbs, a deepening property crisis and the risk of the potential delisting of dozens of local firms from the US.

In SA:

• The repo rate was hiked again in September, bringing the rate to 6.25%. 
• Inflation peaked at a 13-year high of 7.8% in July, before moderating to 7.6%, in August.
• The ALSI fell 1.9% for the quarter. 

QUARTER 4 (Q4)

The US Federal Reserve increased rates by a further 75bps in November and 50bps in December.  

Notably, softer global inflation data and positive news from China spurred a ‘relief rally’ across asset classes in Q4.  

The MSCI Emerging Market Index and the MSCI World Index both returned 9.8% in USD terms.

On the local front;

The SARB increased the repo rate in November to 7%. 

 Equities continued to advance on the back of better global sentiment, with the ALSI up 15.2% for the quarter, finishing the year in positive territory, up 3.6%.  South African shares still look cheap.

Eskom hovered from bad to worse.

The Rand gained some ground against the USD in Q4.   After hitting a high of R18.4/USD in early November, the rand advanced to trade around R17/USD at year end. Overall, the rand depreciated 7% against the USD in 2022.

Sources:  Stanlib / MitonOptimal