MARKET COMMENTARY Despite starting the year on a strong footing, global markets ended the month slightly weaker, as ongoing concerns around the pace of global Covid-19 vaccine rollouts as well as continued lockdowns in the UK and certain areas in Europe weighed on sentiment. US President Joe Biden was inaugurated on the 20th of January, as the US courts rejected continued unsubstantiated claims of voter fraud by Donald Trump and his campaign. This followed violent protests from Trump supporters at the Capitol building, a demonstration which led to the death of five people. At its meeting in January, the US Federal Reserve left interest rates unchanged and announced that it would continue with its bond-buying programme. This, along with a proposed $1.9 trillion economic aid and rescue package announced by President Biden, will continue to provide support to the US economy in its recovery from the Covid-19 pandemic. South African equities finished the month higher, bucking the trend in global developed markets slightly. The upward move in the local index was largely due to strong performance from large index constituents such as Naspers and Prosus, as well as resource counters. Local bonds ended the month higher, supported by foreign buying (albeit at a slower pace than previous months) as well as a slight flattening of the curve resulting from the decreased likelihood of further interest rate cuts. Local listed property continued to exhibit volatile performance, as the stricter adjusted level 3 lockdown announced at the end of December acted as a headwind and increased uncertainty regarding the outlook for the sector. The rand was weaker against most major developed market currencies for the month, as broad US dollar strength acted as a headwind for most emerging market currencies. The South African Reserve Bank’s Monetary Policy Committee (MPC) announced during the month that it will leave the repo rate unchanged at 3.5%. This was the third consecutive meeting where the MPC decided to leave the rate unchanged, despite two of the five members of the MPC favouring a cut. SA headline CPI eased to a year-on-year figure of 3.1% to the end of December (from 3.2% in November), as transport inflation eased following the petrol price decrease in December. The rate of inflation for the 2020 calendar year was the lowest since 2004 and the second lowest since 1969. South Africa’s trade surplus narrowed to R32 billion in December (following a revised figure of R35 billion for November), with the trade balance supported by strong precious metal prices. The JSE All Share Index (+5.2%) ended the month higher for a third consecutive month, with the strong performance driven by large industrial and resource constituents. From a sector perspective, Industrials (+8.4%) and Resources (+5.1%) ended the month with decent performance, while Financials (-2.6%) struggled. The top performing shares amongst the largest 60 companies on the JSE in January were Sappi (+30.2%), Sasol (+23.2%) and Truworths International (+21.1%). The worst performing shares in January were Discovery (-16.2%), Northam Platinum (-9.3%) and Anheuser-Busch InBev (-7.2%). Listed property (-3.2%) gave up some gains during the month, as the uncertainty around the prospects of the sector were exacerbated by the more stringent level 3 lockdown measures. Local bonds (+0.8%) ended the month higher, supported by continued foreign buying as well as a slight flattening in the yield curve following the decreased chances of future interest rate cuts. Cash delivered a stable return of +0.3% for the month. The rand was weaker against most major developed market currencies for the month. The rand depreciated against the euro (-1.7%), the US dollar (-2.4%) and the pound sterling (-2.9%) during the month. *All data is sourced from Morningstar Direct as at 31/01/2021. The performance of South African asset classes is quoted in rands Source: Morningstar
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