Market overview
The FTSE/JSE All Share closed last week at 75 084.38, decreasing by 3.34%. The technology and consumer discretionary sectors increased by 9.07% and 7.58% respectively during the week. The oil & gas and telecommunication sectors decreased by 4.59% and 3.39% respectively during the same period.
Looking at the MSCI indices, developed markets increased by 1.30% during the previous week while emerging markets increased by 1.47% over the same period.
SA inflation continues to decline
Consumer price inflation cooled in December, to 5.1% year-on-year, compared to 5.5% in November. Inflation remains above the July trough of 4.7%, but within the SARB’s target band.
Going forward, economists expect disinflation over the course of 2024, with CPI approaching the mid-point of the SARB’s target range. This echoes the trend in the US, where inflation is also expected to continue falling in 2024. With inflation becoming less of a problem, it is likely we have reached the peak in the interest rate cycle, which Central Banks have also begun alluding to. Reduced price pressure and the lower debt funding cost would be well-received by consumers who are starting to feel the pinch. We can see evidence of this in recent results announcements from some domestic retailers.
No change to SA rates
The Reserve Bank unanimously decided to keep the repo rate at 8.25%, in line with market expectations. The bank highlighted the persistence of inflation risks while emphasizing a balanced evaluation of risks to medium-term growth. It noted that the return of inflation to the target has been slow despite the expected gradual moderation
Strong growth in US economy
The US economy grew by an annualised 3.3% in the 4th quarter, ahead of a forecasted 2% rise, and following a 4.9% rate in Q3. Consumer spending slowed, while consumption of services rose faster. Residential investment continued to grow although at a slower pace. Considering the entirety of 2023, the US economy grew by 2.5%, as opposed to 1.9% in 2022 and the Fed’s projections of 2.6%.
Thanks to PPS Investments for the Market Overview.
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