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Written Version

What a month it’s been!

  • On 29 June 2021 the Constitutional Court made history by finding former President Jacob Zuma guilty of being in contempt of court and sentencing him to 15 months’ imprisonment. Not house arrest at Nkandla, not a suspended sentence, not a fine.  He has 3 days left to hand himself over at a police station in either Nkandla or Johannesburg, whereafter he will start to serve his term.  While this is not economic news, we thought it was well worth the mention.
  • Over in the US, there seems to be a continued disconnect between employers and jobseekers. Payroll numbers are still down by approximately 7 million compared to February 2020 and yet both services and manufacturing companies are claiming a severe shortage of employees to fill roughly 9 million open positions in these sectors.  Some commentators speculate that this may be due to the fact that stimulus cheques received by lower income bracket employees were actually more than their normal salaries would be if they had to re-enter the formal job market.  This is a scenario that will turn abruptly when the Covid stimulus dust settles and there is no more “free money” available.  We expect that when this happens, the “transitory” inflation we keep hearing about may reverse rather quickly and that the effect on global markets could be quite sharp.
  • During the month, the Federal Reserve (the US Reserve Bank) rocked the boat simply by mentioning possible interest rate hikes around 2023. This caused a big dip in most global markets in the middle of the month, but US markets quickly bucked the trend to forge ahead towards the end of the month.
  • On the 11th of June, the FTSE 100 in the UK closed at its highest level since February 2020, but it all came crashing down with the update from the Fed. Unlike the US, it didn’t enjoy the strong recovery, with some Brexit niggles still impeding trade with the EU, its biggest trade partner.
  • There are however some positives coming out of the UK, with an estimated 63% of the workforce back at their normal place of work and a 47% increase in restaurant visitors as the lockdown in the country continues to ease.
  • CNBC reports that business activity in the Euro Zone accelerated by the fastest rate in 15 years. A systematic loosening of Covid restrictions across the various countries in the Eurozone, has seen GDP growth forecasts improve to 4,6% with Germany and France leading the pack.
  • Even so, the wins in economic activity have not translated into another month of stock market growth with the Eurostoxx 50 index ending the month relatively flat.
  • Our local stock exchange was not sure how to deal with the announcement from the Federal Reserve with a wide range of returns from the various underlying sectors and an overall loss for the month on the Allshare Index. Even so, it is still up a descent 11,5% year to date.
  • Never to be left out of the limelight, the Crypto industry in South Africa was dealt another blow with yet another enormous scam making the news. With media reports ranging from $3,6 billion down to R71 million worth of Africrypt investors’ funds lost, we find it hard to imagine who would be the investors handing over these millions of Rands or Dollars to an unknown company making promises of outrageous returns.
  • The Rand took a breather from the one-way move experienced over the last several months, ending June at R14,30. While this may be around 4% weaker than at the end of May, it is still just over 5,5% stronger than it was at the end of January.
  • One month index movements:
    • JSE All Share Index: -2.52%
    • S&P 500 (US): 2.25%
    • FTSE (UK): 0.21%