Headlines swung squarely to Federal Reserve policy and geopolitical uncertainties this week, with investors anticipating Fed Chair, Jerome Powell’s Jackson Hole conference speech on Friday. Whilst market participants hoped that the event would provide insights into the Fed’s policy outlook, the speech turned out to be a non-event as Powell did not signal any deviation from the central bank’s July assessment of economic conditions or outlook.
Powell said the U.S. economy had made enough “substantial progress” to warrant tapering of monthly bond purchases this year, though the central bank would be assessing data from the raging delta variant of the coronavirus. Powell also stressed the Fed won’t be in a hurry to begin raising interest rates after the wind-down of bond purchases.
President Biden vowed to continue evacuations from Afghanistan after explosions in Kabul killed 70 people, including 13 U.S. service members, and he said the U.S. will retaliate against those responsible. The attack claimed by the Islamic State terrorist group comes after more than 100,000 people had been evacuated from Afghanistan since the Taliban moved to take the capital city.
The U.S. Food and Drug Administration (FDA) fully approved the Pfizer-BioNTech coronavirus vaccine for use in people 16 and older this week. At the same time, a growing number of U.S. employers are imposing coronavirus vaccine mandates on workers. Goldman Sachs requires bankers to prove they’ve been vaccinated. Other U.S. companies include CVS, Chevron, and Hess. Delta Air Lines even said it would levy a $200 monthly charge on workers who refuse to take the vaccine.
The China Securities Regulatory Commission (CSRC) pledged to cooperate with the U.S. regarding the auditing of Chinese companies that trade on stock exchanges in the U.S. The dispute stems from China’s refusal to provide full access to the financial data of Chinese companies that trade in the U.S. on national security grounds. The Securities and Exchange Commission (SEC) pledged to strictly enforce a three-year deadline that requires Chinese firms to permit inspections of their financial audits. If businesses refuse, their shares could be delisted from the New York Stock Exchange and Nasdaq as soon as 2024.
European economic data was strong in August, suggesting that the eurozone remains in expansionary territory. The Composite Purchasing Managers’ Index (PMI) came in at 59.5, with growth in both the manufacturing and services sectors remaining robust.
Meanwhile, UK’s composite PMI slowed to 55.3 in August compared to 59.2 in July, largely driven by a slowdown in the services sector. The UK will roll out a program to deliver booster shots of the coronavirus vaccine to the most vulnerable populations, beginning in early September, and later expand eligibility to those 70 years and older.
It was a strong week for global equities with major indices posting decent gains. In the U.S., the Dow Jones (+0.96%), S&P 500 (+1.52%) and the Nasdaq (+2.82%) all ended the week stronger. Similarly, in Europe, the Euro Stoxx 50 (+1.05%) and FTSE 100 (+0.85%) posted positive returns, along with China’s Shanghai Composite Index (+2.77%) and Japan’s Nikkei 225 Index (+2.32%).
Market Moves of the Week:
South Africa’s unemployment rate advanced to a record 34.4% (or 7.8 million) in the 2nd quarter of 2021. Trends show that unemployment is concentrated among the youth. Nearly two-thirds (64.4%) of those aged 15 to 24 are unemployed, and 42.9% of those aged 25 to 34 are unemployed. South Africa’s unemployment rate is now the highest of 82 countries tracked by Bloomberg.
The JSE All Share Index ended the week up +2.48%, with all three of the major sectors leading the market higher. The resource (+4.64%) and financial (+3.25%) sectors were particularly strong, compared to the industrial sector (+0.67%). By Friday close, the rand had strengthened to the U.S. Dollar, trading at R14.68.
Chart of the Week:
Stats SA has finalised a comprehensive overhaul of its national accounts. The latest GDP rebasing and benchmarking exercise has resulted in an upward revision in the size of the economy, showing that the economy is 11,0% larger in 2020 than previously estimated. In the 10 years between 2011 and 2020, the percentage difference between the previous and revised levels averaged 9,6%. If the 2020 World Bank figure for South Africa is adjusted by Stats SA’s upward revision of 11,0%, SA’s economy still lags Nigeria and Egypt in size.
Whilst volatility is likely to continue amid current market uncertainty over the coronavirus disease, our message to all investors remains the same – stay calm in making decisions that are aligned with your long-term goals, not current market conditions. In any market environment, we strongly believe that investors should stay properly diversified across a variety of asset classes and that clients financial plan supports their long-term goals, time horizon and tolerance for risk.
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