Interesting Articles

Markets reacted predictably to the recent "red sweep" in the US elections, with US equities, the dollar and bond yields experiencing significant gains. In contrast, non-US equity markets and currencies faced challenges. The possibility of Donald Trump implementing corporate tax cuts and deregulation in his second term as US president is particularly advantageous for US equities. Deregulation is expected to stimulate entrepreneurship, increase labour productivity and lower inflation, while tax reductions could enhance corporate earnings and growth prospects. Conversely, Trump's proposed tariffs could adversely affect global markets, stunting growth. A reactionary trend to fiscal easing is likely to emerge globally, especially in China, as countries respond to tariffs, although they are unlikely to fully mitigate their impact. Consequently, our increased equity exposure is focused on US markets, leading to an overweight position in US equities relative to other developed and emerging markets. Both the US and China, as the world's largest economies, now have substantial capacity to enhance their economies through fiscal measures, creating an environment that favours equities over bonds due to anticipated robust economic growth and resurgence in inflation, prompting us to make a tactical shift in investments from bonds to equities. Read more

If I were presenting on the state of the global economy today, I would be calling for a four-alarm fire: I see a global crisis unfolding over the next few years, yes, financial in part, but this time around, so much more. A combination of long-simmering, long-ignored factors in a slew of mainly Western economies is coming to a head. Read more

The flight of foreign investors from both equity and bond holdings has reinforced this lack of diversity in capital markets. The data show that foreign holdings of JSE equities as a share of nonresidents’ holdings of domestic shares declined from about 40% in the middle of 2019 to its current 27.6%, representing a 31% decline in foreigners’ appetite for South African stocks. Read more

The data show that South Africa is an outlier in spending on social services and grants, allocating some 15% of GDP. Our social spending is higher than almost all countries in this sample, with the exception of a few African and Latin American nations. Much more importantly, however, government is also simultaneously a very poor allocator of revenue to investment spending. Read more

On Wednesday, 29 May, South Africans go to the polls for their seventh national election since democracy. As is usual in an election year, there has been busy debate and discussion around possible voting outcomes – almost as busy as the number of new parties on the ballot paper! In the graphic below I have tried to be a bit more scientific in my assessment of the key election question: What percentage of the national vote will go to the ANC? Read more

Retail sales rose 0.6% month-on-month in February, below consensus. With consumer Covid savings depleted, the US consumer is under pressure. Money and credit growth are weak, delinquency rates are rising for non-mortgage debt and banks have continued to tighten lending standards. Non-mortgage debt payments have surged (Chart) and for the first time on record, interest payments on non-mortgage debts are as high as mortgage interest payments. This will constrain consumer spending and confidence. Read more

These rising costs are due to an escalating interest environment, struggling economic growth and, of course, wastage and corruption in government. A comparison with other middle income countries shows that South Africa’s debt levels are significantly elevated. We are some 20 percentage points above the mean and median of the debt-to-GDP ratios in the sample below, in the unfortunate company of other struggling nations such as Argentina and Pakistan. Read more

The real story for me lies in South Africa’s relative economic growth levels. If we look back at 2021, world GDP growth was 6.2%, emerging markets (EMs) were at 7% and South Africa was at 4.7%. Simple ratios tell us that in 2021 the world was growing 0.32 times faster than South Africa and EMs 0.49 times faster. Now fast forward to 2023, when the world grew 3.7 times faster and EMs 5.7 times faster than South Africa. 2024 is looking slightly better, but the rest of the world and EMs are still growing 1.9 times and 3 times faster than us, respectively. Read more

The Department of Water and Sanitation Blue Drop Report for 2023 reported that 46% of the water supply system in South Africa is undrinkable. Dr Anthony Turton of the University of the Free State said that 90% of the country’s wastewater works are to some extent dysfunctional.The state attorney’s office sent an inquiry to the Department of Home Affairs asking why the visa backlog continues to grow, now sitting at close to 100 000 applications. Read more

A victory that lifted a nation’s spirit: I had the incredible opportunity to attend the Rugby World Cup 2023 final in Paris, and what a privilege it was to watch our team triumph! The Springbok victory felt like a much-needed escape from the many troubles our beloved nation faces. A real transformation is underway in Saudi Arabia: The progress of Saudi Arabia, especially Riyadh, in the last six years has been remarkable. It is rapidly becoming the new Dubai, with a growingemphasis on women's empowerment. Read more