Tag: interest rates

The market lens for the rest of 2022 will be focused on the impact of political and policy miscalculations. Russia’s President Vladimir Putin has fully miscalculated the West’s response to his invasion of Ukraine. The speed, strength and unity of global sanctions is bringing about economic collapse in his country.

The permanent institution of a central bank came to the United States in 1913. Three unsuccessful attempts had been made before then. This institution was, and is, a banking cartel, which goes by the deceptive moniker, Federal Reserve.

A generally weakening Rand and mounting inflationary pressures have meant that the South African Reserve Bank (SARB) has once again raised interest rates - to the distinct detriment of the weakest members of our society.

Inflation has been making a comeback. Not so long ago, it had seemed that we had vanquished (at least in the developed world) this sneaky foe of long-term wealth creators everywhere, thanks to tightly controlled central bank policies and the wonders of inflation targeting.

Markets continued their rally into the fourth quarter of 2021, with South African (SA) equities delivering its strongest calendar year return since 2012 (up 27.1%) and global equities since 2015 (up 28.8% in Rands).

There has certainly been plenty of foolishness, as a new generation of day-traders have pushed meme stocks, special purpose acquisition companies (SPACs) and cryptos to ridiculous levels. Battle-hardened investment professionals have not been immune to bouts of irrational exuberance either.

Will investment fundamentals return in 2021 or will the great disconnect of 2020 continue? As we enter 2021, the market’s recent bout of festive cheer will have left many investors feeling upbeat. However, do not allow yourself to be carried away by the market’s high spirits. While there are many reasons to feel positive about the year ahead, it is equally important to note what markets seem to have forgotten – namely that the pandemic and its consequences are not yet behind us.

The South African Reserve Bank (Sarb) Monetary Policy Committee (MPC) kept interest rates steady at 3.5% at the scheduled September 2020 interest rate-setting meeting despite downwardly revised growth and inflation views. This decision tied in with the view of 15 out of the 25 analysts surveyed by Reuters, while we were one of the ten favouring a 25-basis point cut.

Three months ago, investors were looking forward to an improved year of global growth and corporate earnings. That was then. The coronavirus crisis is an era-defining event; one which will have a significant impact on not only how we live, but also where we invest.

With severely limited fiscal space, planned economic reforms need to be fast-tracked. South Africa is in a grip of panic over the impact of the coronavirus disease 2019 (COVID-19). The situation prompted an extraordinary address to the nation by President Cyril Ramaphosa on the evening of March 15. Apart from very real human health concerns, he commented that the outlook for the local economy – already on a weak footing heading into 2020 – is a big headache. Economic growth forecasts have been cut over the past few weeks as forecasters realise that the impact of the pandemic will be larger than previously thought. This begs the question: how will local authorities respond?