The investment markets

There was a mixed bag of performance in the financial markets across the globe in the third quarter of 2020.

US shares posted positive gains on the back of economic recovery and relaxed monetary policy. The S&P 500 returned 4.44% in Rand terms compared to 17.10% in the previous quarter. There were concerns at the end of the quarter about whether there would be a smooth transition of power if President Donald Trump loses in the elections and rising Covid-19 cases in Europe created concerns on the markets.

Japanese shares also gained despite the strengthening of the yen. Shinzo Abe, who was the longest serving Japanese prime minister, resigned for health reasons and was replaced by Yoshihide Suga.

Emerging market equities were positive with the MSCI Emerging Markets returning 8.73% in USD terms. China, Taiwan, India and South Korea were outperformers while Turkey, Thailand and Indonesia lagged.

UK equities fell, due to exposure to poorly performing stocks in the oil and financial sectors. Concerns around the resurgence of Covid-19 infections weighed on markets.

On the local front, the rand strengthened during the quarter, the repo rate was cut by 25 basis points to an all-time low of 350 basis points. Property was down 15.40%, Resources were up 6.0% with the Industrial and Financial sectors down 2.3% and 1.6% respectively.

In the previous quarter, South Africa’s GDP took an historic nosedive, the lowest it had ever been since 1992. Investors are now showing more confidence about positive returns on their savings, as eased measures of the Covid-19 lockdown mean the economy is generating momentum, with the full reopening of key industries, and a return to international travel.

South Africa’s large debt load is a concern & ongoing troubles with Eskom, SAA and other SOE’s remain in the spotlight.

Domestic (rand-denominated) fund returns