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Markets in a nutshell

WORLD

EQUITIES

A few giant US tech stocks pushed US bourses to their most expensive levels since the tech bubble in 2000—emerging markets seesawed as high yields, demographics and natural resource endowments simultaneously signalled reward and danger

BONDS

Developed market bond yields hovered at irrational lows on unrelenting central bank stimulus—markets briefly reflected rising inflation risks after the US Federal Reserve changed its policy to target average inflation

CURRENCIES

US dollar weakness should persist—but precious metals and even cryptocurrencies should stay well bid amid growing fiat currency risks

COMMODITIES

Precious metals gold and silver rose further on US dollar weakness and continued monetary and fiscal largesse—while Brent crude stabilised around $40/bbl on anaemic demand

ECONOMY

Economic activity rebounded after historic second-quarter contraction as lockdowns eased—but recession risks persist given high unemployment, resurgent coronavirus and expiring fiscal stimulus

MONETARY AND FISCAL POLICY

Rising sovereign debt levels, pervasive experimental monetary (and now) fiscal policy supported marketsbut the US elections, geopolitical tension and second-wave infection rates are material risks

SOUTH AFRICA

EQUITIES

SA equities advanced marginally, led by resources stocks while industrials and financial counters lagged—the managers are cautious despite optically attractive South African equity and listed property valuations

BONDS

The SA government bond yield curve steepened after SARB’s repo rate cuts—with the longer end of the curve still availing high real yields under current inflation forecasts

CURRENCIES

The rand was volatile given internal and exogenous shocks but ended slightly stronger against a weaker dollar—emerging market currencies should enjoy tailwinds from material increases in hard currency money supply

COMMODITIES

Precious metals gold and silver rose further on US dollar weakness and continued monetary and fiscal largesse—while Brent crude stabilised around $40/bbl on anaemic demand

ECONOMY

The SA economy contracted a record 16% in the second quarter and unemployment rose by 2.8 million people due to COVID-19 lockdowns—employment recovery will be slow given the dearth of fixed investment opportunities

MONETARY AND FISCAL POLICY

Finance Minister Mboweni’s supplementary budget stressed the rising risk of a full-blown debt spiral if government does not cut expenditure—given the growth vacuum and growing budgetary share of debt funding costs

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