Disclosure: This article is posted to inform readers and not to provide financial advice.
What is an Economic Review?
The state of the economy impacts you in a tangible way – even more so if you invest. A quarterly economic review offers a retrospective on significant events that took place over that time, as well as how industries did both globally and locally and how this affected the various asset classes.
The 2nd quarter covers April, May and June and we reflect on what happened in The Markets globally and locally, as well as Key News Headlines. By understanding what’s happening in the world and how things are changing quarter-on-quarter should give you a good indication of trends and insights for key financial decisions, like investing or retirement decisions.
The 2nd quarter covers April, May and June and we reflect on what happened in The Markets globally and locally, as well as Key News Headlines. By understanding what’s happening in the world and how things are changing quarter-on-quarter should give you a good indication of trends and insights for key financial decisions, like investing or retirement decisions.
Read on for the TVC Economic Review of Q2 2024:
Global and Local Markets in Summary
We’ve seen some recovery in advanced economies thanks to easing inflation, improved supply conditions and strong labour markets. However, growth is expected to stay below pre-pandemic levels, with various headwinds – such as renewed inflationary pressures, widening geopolitical tensions and risk of prolonged period of monetary policy tightening – keeping the outlook uncertain.
Elections also seemed to be a strong theme for this quarter, as we faced the results of the South African national government elections and the United States Presidential race got heated.
Elections also seemed to be a strong theme for this quarter, as we faced the results of the South African national government elections and the United States Presidential race got heated.
Global Economic Landscape
Over the past quarter we saw some pronounced volatility in the global macroeconomic landscape and capital markets.
Inflation and Interest rates
Inflationary pressures have been a persistent influence on global macroeconomic conditions and capital markets – despite hopes for moderation.
In the United States, for instance, consumer inflation increased 3.3% over the last quarter (CPI data) – surpassing target rates set by central banks, leading to market adjustments. Experts now expect two rate cuts by the Federal Reserve within the year, as they wait for U.S.inflation to return to target.
All in all, the trend among global central banks has moved away from tightening. Markets took moderating labour markets and consumer spending as a good indication that inflation will remain suppressed enough for rate cuts later in the year.
With global central banks starting to cut rates, such as The European Central Bank, other major central banks stayed on hold due to sticky inflation.
In the United States, for instance, consumer inflation increased 3.3% over the last quarter (CPI data) – surpassing target rates set by central banks, leading to market adjustments. Experts now expect two rate cuts by the Federal Reserve within the year, as they wait for U.S.inflation to return to target.
All in all, the trend among global central banks has moved away from tightening. Markets took moderating labour markets and consumer spending as a good indication that inflation will remain suppressed enough for rate cuts later in the year.
With global central banks starting to cut rates, such as The European Central Bank, other major central banks stayed on hold due to sticky inflation.
Growth/ GDP
We experienced relatively weaker economic data in Q2 compared to Q1, questioning critical areas of economic resilience. Even as certain interest-rate sensitive pockets of the economy struggle, it appears overall economic activity endures at a decent pace.
Among advanced countries there is economic resilience – thanks to labour market and consumer spending – while a slowdown in 2024 is expected, against a backdrop of tightened financial conditions.
Interestingly, emerging and developing economies are forecast to see steadier growth, and at a notably faster pace compared to advanced countries, with 4.0% in 2024 and 4.1% in 2025.
Among advanced countries there is economic resilience – thanks to labour market and consumer spending – while a slowdown in 2024 is expected, against a backdrop of tightened financial conditions.
Interestingly, emerging and developing economies are forecast to see steadier growth, and at a notably faster pace compared to advanced countries, with 4.0% in 2024 and 4.1% in 2025.
The Indices
Increasing about 4% over the quarter, The Standard and Poor’s 500 Index was kept afloat by the prospect of more accommodating financial conditions and better corporate earnings.
Equities
Equity markets have been resilient amid these uncertainties, producing strong returns in May. In Q2 emerging market equities finished ahead of developed markets, supported by a rebound in China.
Global Bonds
The quarter might have started out on a disappointing note for global bond markets, but later we experienced a more conducive market environment – driven by the softer labour market conditions and encouraging inflation news.
Commodities
In the second quarter The S&P GSCI Index achieved a modest gain – with industrial metals and precious metals proving the strongest.
Stocks related to the artificial intelligence (AI) theme continued to perform strongly over the quarter, with technology companies producing strong returns in May. Gold prices hit a record high in April and prices rebounded for energy in May.
Stocks related to the artificial intelligence (AI) theme continued to perform strongly over the quarter, with technology companies producing strong returns in May. Gold prices hit a record high in April and prices rebounded for energy in May.
Local Landscape
Back home in South Africa factors like currency volatility and political instability were particularly significant around the national election. The widely anticipated elections saw the ANC lose its majority, with some political mud-slinging post elections.
However, we ultimately saw a fairly successful outcome which improved investor sentiment – as a new coalition government made up by African National Congress Party and Democratic Alliance and a number of smaller parties called “Government of National Unity (GNU)”, was formed timeously. President Cyril Ramaphosa was sworn in for his second term.
Load shedding woes seem to have been put on pause, with Eskom adding 800MW to the grid in June – but concerns around tariff increase in 2025 on the horizon.
However, we ultimately saw a fairly successful outcome which improved investor sentiment – as a new coalition government made up by African National Congress Party and Democratic Alliance and a number of smaller parties called “Government of National Unity (GNU)”, was formed timeously. President Cyril Ramaphosa was sworn in for his second term.
Load shedding woes seem to have been put on pause, with Eskom adding 800MW to the grid in June – but concerns around tariff increase in 2025 on the horizon.
Inflation
When it came to inflation in SA for Q2, the SA Reserve Bank kept its base lending rate steady at 8.25% throughout, due to the central bank’s expected hawkish stance. In June, the Reserve Bank Governor said that SARB must restore faith after struggling to slow inflation to 4.5% for about 3 years – as persistent inflationary pressures are dogging the economy.
Market Performance
South African bonds posted a 7.5% return for the quarter, SA Equities did pretty well, and Property declined. Both the FTSE/JSE All Share Index and Capped SWIX Index delivered 8.2% in rand terms, due to general gains in commodity prices.
When it comes to real gross domestic product (GDP) growth, we saw contraction by a marginal 0,1% in the first quarter (January–March) of 2024.
There was good news when it came to the strength of the South African rand – providing a critical gauge of investor sentiment which reflects optimism. We also saw foreign direct investment inflows of R24.4 billion into South Africa in Q1 2024, indicating an upward trend.
There was good news when it came to the strength of the South African rand – providing a critical gauge of investor sentiment which reflects optimism. We also saw foreign direct investment inflows of R24.4 billion into South Africa in Q1 2024, indicating an upward trend.
The investor perspective
These developments in both global and local Markets highlight the need for an analytical, evidence-based approach to investment. It’s also important to adopt a strategy tailored to your individual goals. Our approach at TVC Wealth and Health Managers emphasises aligning your investment choices with your unique risk tolerance and financial objectives.
Working with a professional Financial Advisor is the surest way to make your money work for you and accumulate wealth.
Working with a professional Financial Advisor is the surest way to make your money work for you and accumulate wealth.
