Tag: Russia-Ukraine war

Looking at global news headlines, we are inundated with negative news – from concerns about the war in Ukraine, the possibility of a global recession and uncertainty about the future of global inflation and interest rates. Locally, things appear equally uncertain and gloomy.

This year has been nothing, if not eventful. We started 2022 with Russian President, Vladimir Putin, declaring war on Ukraine. This event then triggered an energy crisis and has driven inflation, in major economies, to unprecedented levels, along with interest rates. And now, as the year draws to a close, COVID-19 has snuck in again to dominate headlines.

Significant uncertainty, marked by rampant inflation, fears of a looming recession and growing geopolitical risk, clouds the near-term global outlook. The knee-jerk reaction is to retreat to safe assets and preserve capital until the storm has blown over.

Central banks around the world are hiking interest rates to battle rising inflation. Recessions are now expected in the US, UK and Europe in the next year. Interest rates around the world are rising at an alarming pace, as central banks admit that inflation is becoming more ingrained, rather than just a series of transient shocks.

A 26% increase in headline earnings per share and a robust balance sheet enabled an 81% increase in the interim dividend per share. The South African economy held up relatively well as global economic conditions deteriorated significantly in the first half of 2022.

Russia’s invasion of Ukraine has opened fault lines between nations which will affect trade relations and investment for years to come. The war in Ukraine is already having a significant effect on inflation and activity in the world economy as commodity prices have soared and supply chains have been disrupted.

The notion of a polycrisis – various systemic crisis occurring simultaneously and interacting with one another – has been around for a while but has gained renewed traction for obvious reasons.

June was a brutal month for global equities, capping the worst first half of a year since the launch of the MSCI All Country World Index in 1987. For indices with longer track records, the story is worse. In the case of the US S&P500, the first half performance has not been this bad since 1962.

With South Africans learning to live with the current cycle of stage 6 load shedding, many believe the ongoing power cuts to be the antagonist behind the weak Rand. However, according to treasury experts, load shedding is merely a small contributor to a far greater picture.  

Equity markets have been under considerable selling pressure in 2022, as investors anticipate that stubbornly high inflation will cause central banks to raise short-term interest rates multiple times this year. At the same time, expectations for global economic growth have been revised downwards, following further disruptions to global supply chains on the back of Russia’s invasion of Ukraine and China’s strict COVID-19 lockdown measures.