Manager Comments – 30 September 2023
Market Overview
In Q3 2023, the investment landscape presented various challenges and opportunities. Here’s a concise summary of key developments across major regions:
Global Market
Global shares faced turbulence in August due to concerns about the Chinese real estate sector and weaker-than-expected economic data from China. Emerging markets underperformed their developed counterparts. Rising government bond yields added to market volatility, as central banks debated further rate hikes, leading to eroding investor confidence.
South Africa
South Africa’s private sector showed signs of growth in August, with the S&P Global South Africa Purchasing Managers’ Index (PMI)rising to 51.0, indicating expansion. However, domestic challenges, such as power cuts and currency weakness, continued to hinder growth.
Namibia
Namibia experienced a boost in real GDP growth in 2022, supported by the easing of COVID-19 restrictions and recovery in various industries. Inflation increased due to elevated global commodity prices, prompting the Bank of Namibia to raise interest rates. The country’s economic outlook remains positive, with expected growth in diamond processing, retail trade, and tourism.
US
US equities declined in August as investors questioned the Federal Reserve’s tightening policies. Economic data remained strong, butconcerns arose from a divided Fed on future rate hikes. Retail sales improved, while industrial activity slowed, and the unemployment rate increased slightly. Tech giants faced a pull-back, impacting the broader index.
Eurozone
Eurozone shares fell in August, with energy and real estate being the only sectors to register positive returns. Inflation remained stable,while unemployment and business activity showed signs of decline. The European Central Bank faced a significant decision regarding interest rates in September.
UK
UK equities faced headwinds from concerns about the Chinese economy and mixed inflation data. Inflation remained high, prompting the Bank of England to raise interest rates. While Q2 economic growth exceeded expectations, forward-looking indicators suggested economic challenges.
Japan
Japanese equities saw mixed performance, with large-cap growth stocks declining due to higher government bond yields. Domestic-oriented stocks benefited from increased tourism but faced political tensions, impacting market sentiment.
Asia (Ex Japan)
Asia ex Japan equities experienced a sharp decline, with weak Chinese manufacturing and property sectors affecting investor sentiment. Several markets posted declines, with China’s stimulus measures and property sector concerns in focus.
Emerging Markets
Emerging market equities fell in August, driven by concerns about US interest rates, the Chinese economy, and property sector issues. South Africa and Colombia experienced weak performance, while some markets, including Turkey and Egypt, saw positive returns.
Global Bonds
Fitch Ratings downgraded the US’s credit rating, leading to brief yield increases in US Treasury bonds. Despite the absence of aFederal Open Market Committee meeting, Federal Reserve Chair Jerome Powell emphasized the need to address inflation. Europeangrowth remained weak, and the Bank of England raised interest rates.
Credit markets faced challenges, with European investment grade underperforming due to a bleak economic outlook. High yield credit markets performed better but remained broadly unchanged. The US dollar strengthened amid expectations of prolonged higher interest rates.
Commodities
The S&P GSCI Index remained flat in August. Energy prices saw modest gains due to production cuts by OPEC+ members. Industrial metals, agriculture, and precious metals faced price declines, driven by various factors, including falling prices for nickel, zinc, aluminum, and copper.
For a tailored investment strategy based on these market dynamics, please contact your wealth manager.