Global equity markets had a rocky start to August as job market data in the U.S. came in weaker than anticipated by the market. However, towards the end of the month, weaker inflation data implied that interest rate cuts could be larger and deeper than once thought, leading to increased risk-on sentiment. As a result, global equity indices once again reached new highs. Late in the month, Kamala Harris officially became the Democratic candidate for U.S. President and appeared to be polling slightly ahead of Donald Trump at month’s end.
South African bonds and equities continued to benefit from the improving foreign sentiment in August as both asset classes outperformed their emerging market peer aggregates. SA inflation for July surprised on the downside, coming in at 4.6% instead of the market consensus of 4.8. Core inflation slowed to 4.3%, which was lower than the midpoint of 4.5%, occurring a quarter earlier than initially forecasted by the SARB. All attention is now on the upcoming MPC meeting in September to see if the long-awaited cycle of interest rate cuts begins.
- The JSE All Share closed higher (up 1.4%) for its sixth consecutive month.
- Financials (up 5.3%) and Industrials (up 4.0%) performed well while Resources (down 10.1) struggled due to softer commodity prices.
- Small-caps (up 5.4%), Mid-caps (up 0.4%), and Large-caps (up 1.0%) all ended the month higher.
- The S&P SA REIT sector (up 10.9%) and the SA Listed Property sector (up 8.3%) benefited from positive sentiment and rate cut prospects.
- SA Nominal Bonds (up 2.4%) and Inflation-Linked Bonds (up 2.2%) continued their positive momentum.
- Developed Market Equities trounced their Emerging Market peers in U.S. Dollar terms, with the MSCI World Index up 2.7% and the MSCI Emerging Market Index continuing to edge higher, up 1.6%.
- The Rand had a strong month, as sentiment towards South Africa remained positive, and the dollar weakened. Relative to the U.S. Dollar (Rand appreciated 2.4%), the Euro (Rand appreciated 0.2%) and the Pound Sterling (Rand appreciated 0.1%).
- Commodities were a mixed bag in August. Gold (up 2.8%) rose higher, while Platinum (down 5.5%) and Brent Crude (down 2.4%) continued to weaken.
Source: Factset
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