Dear Valued Client
It’s been another eventful year for many wrong reasons, with South Africa being pounded by scandals & a seemingly paralysed president, while municipalities crumble, water purification plants founder & Eskom staggers to a near halt & lose their very able chairman (& they ask for another rise in their tariff – this time 36%!).
However, interestingly, there’s also been some good news, with the agricultural sector having another good year, tax collections (especially from the miners) outperforming expectations by around R83bn & with our national treasury performing well in terms of allocating the tax windfall despite being under pressure from the unions in the civil servants’ wage negotiations, where the most recent wage talks in the public service coordinating bargaining council have reached a stalemate.
South Africa’s Johannesburg Stock Exchange has outperformed major indices this year & this has surprised many, although with such high commodity prices this should be expected. It wasn’t a broad-based stock market bull run & many industrials & other stocks are still in dire straits with our economic outlook being pretty bleak.
Global stock markets have been awful this year, losing in the region of -17% on average & the US$ has strengthened tremendously against most currencies with this trend starting to reverse in recent weeks.
With inflation still increasing in some countries & flattening in others in recent weeks, higher interest rates seem to be here for longer than most of us had hoped.
2023 may bring some relief on that front though as inflation numbers are expressed as a percentage of the previous year’s prices & after the surge in prices during 2022, these will hopefully be rather muted in 2023 as prices stabilise (but possibly not reduce as yet).
While a global recession does seem likely, this does not mean that your specific stock portfolio will necessarily lose value as this is already in the price of most stocks. For local investment portfolios, if the Rand continues its recent gains against the Dollar, then this will detract from local JSE gains when expressed in Rand terms next year.
It is likely, in my view, that global investment sentiment will improve from this point (which is one where a recession is expected) & this could lead to a strong Emerging Market rebound (& therefore a stronger Rand).
I trust you are all well & that you’ll be able to celebrate a wonderful Christmas together with your loved one/s.
I’d like to wish you all the best for the year ahead & to also thank you for your business this past year.