The TVC Economic Review for Quarter 2, 2023

Disclosure: This article is posted to inform readers and not to provide financial advice.

What is an Economic Review & Why is it important?

A quarterly economic review examines recent economic events, trends, and indicators. How does it bear relevance to your life? It provides you with the tools to make informed decisions and strategically plan for the future and formulate actionable steps, whether you are an individual, business owner, or investor. The economy intricately connects to all aspects of our society and daily lives. The data below is particularly valuable for making investment choices, managing risks, and allocating resources. While we are now in the third quarter, this blog article aims to provide a brief retrospective look at some significant trends in the second quarter, offering a snapshot of both global economic highlights and local (South African) markets. This information will help you gain insight into the economic narrative unfolding and potentially anticipate developments that may occur in the third quarter.

In this TVC Economic Review we reflect back on the last quarter and recap what moved the markets in Q2 2023

Summary of local and global markets in Q2

We saw the much-celebrated post-pandemic rebound, partly the result of significant policymaker efforts, losing momentum. So much so that the second quarter was overshadowed by concerns that developed countries might slip into a recession in 2023 – a fear described as “deferred” by some and “imminent” by others.

The second quarter was defined by pervasive uncertainty; on one hand, there were concerns about a recession occurring alongside simultaneous GDP growth. Global uncertainties in various areas were not innocuous; caution became the resounding sentiment, driven by persistently high inflation and enduring geopolitical tensions, particularly the well-documented US/China tensions and the Russia/Ukraine conflict.

Meanwhile, Q2 2023 saw South Africa’s economy grow by 0.6% despite challenges, with manufacturing and mining leading the way, while ongoing issues like power cuts, rate hikes, and inflation persisted, impacting household finances and increasing bad debts.

South African Economy: 0.6% Growth Driven by Mining and Manufacturing (Image source: Canva)

Global Markets

Looking back on the Q2 2023 global markets, we find ourselves in a year of pivotal economic shifts, with concerns over slowing post-pandemic recovery, rising inflation, and potential monetary policy changes echoing across the world’s largest economies.
On one hand, 2023 marked a pivotal moment in China’s post-pandemic economic resurgence, as one of the major players on the global economic stage. However, this recovery started to lose steam due to a drop in export demand and sluggish domestic consumption, sparking worldwide economic anxieties and uncertainties regarding China’s financial stability.
As we progress into Q3 2023, projections indicate China’s GDP will grow by 5.3% in real terms, albeit slower than pre-pandemic rates.

On a positive note, in Q2 2023, the Japanese economy outperformed expectations, registering a 6.0% annualised growth rate, buoyed by strong auto exports and tourism, whilst grappling with persistent household sector challenges.

These worse-than-expected slowdowns in the largest economies have elevated risks, including the potential for more restrictive monetary policies in the US and Eurozone. This slowdown bears resemblance to stagflation – a combination of stagnant economic activity and high inflation. Investors may see reduced investment opportunities and market volatility, while citizens could face challenges like reduced job prospects and higher living costs.

Energy Prices Stabilise, But Food Prices Still A Concern

Oil Price Trends: February 2023 – June 2023 (Graph source: Statista)

In the energy sector, oil prices declined due to OPEC+ cuts and economic concerns, while natural gas prices dipped but remained elevated. Banks are shifting away from fossil fuels, governments are endorsing hydrogen and CCUS, and energy companies are embracing CCUS to reduce emissions. This affects ordinary citizens through energy costs and investors seeking sustainable options. Further, falling energy prices lower overall inflation, while core inflation remains high, and elevated interest rates affect different industries, potentially impacting consumers’ purchasing power and businesses’ borrowing costs.

Meanwhile, we saw global food prices initially surge due to the Russia-Ukraine conflict and higher oil prices, but then subsequently decline because of reduced geopolitical tensions, the relaxation of COVID-19 restrictions, and improved crop yields. However, South Africa still grappled with high food inflation due to a weaker currency and infrastructure challenges. This disparity underscores the need for investors to consider regional factors when making investment decisions.

Persistent inflation and and Central Bank Dynamics

In Q2, persistent inflation and tight labor markets posed challenges, leading to warnings of higher interest rates by the U.S. Federal Reserve. The bond market signaled lower short-term rates, contrasting with the stock market’s optimism about economic improvement. This complexity could affect citizens with higher borrowing costs and improved job prospects, while investors navigate uncertainty amid mixed signals from bonds and stocks. Central banks globally, including the U.S. Federal Reserve, are adjusting their plans due to concerns about rising prices. They’re being clear about their actions, a practice known as “jawboning.” While there’s debate about raising interest rates, many major banks have already begun. In June, the U.S. Federal Reserve took a pause, affecting government debt costs (bond yields). Inflation worries stem from higher prices due to costly raw materials, supply chain issues, and increased consumer demand. As the economy improves, some banks consider scaling back stimulus measures, potentially raising interest rates and reducing their asset holdings.

In Q2 2023, advanced economies, notably the United States, outperformed emerging economies. The U.S. boasted a strong job market and a return of investor confidence to its equity markets. Meanwhile, among emerging economies, Hungary, Poland, and Greece displayed modest gains, with Brazil and India benefiting from eased fiscal policy concerns. However, South Africa faced economic challenges, resulting in underperformance. These disparities emphasise the varying investment landscapes between advanced and emerging economies, posing distinct opportunities and risks for investors and businesses alike.

Commodities (Q2 2023):

  • Prices expected to drop by 21% in 2023, including a 23% drop in energy prices.
  • Oil prices down 35% from mid-2022 peak, with a 2023 average of $84/bbl.
  • European natural gas prices fell by 80%.
  • Food prices expected to fall by 8% in 2023 while remaining high.
  • Metals and minerals gained 10% in Q2 2023 but are expected to decline by 8% in 2023.

Equities & Bonds (Q2 2023):

  • Strong global equities performance, with the S&P 500 rising by 8.7%.
  • U.S. stocks, especially in tech, outperformed international stocks.
  • Fixed income markets rebounded.
  • The U.S. economy remained resilient despite inflation and interest rate challenges.
  • Global economic outlook had uncertainty, with Europe battling inflation.
  • China’s Q2 growth recovery was less robust than expected.

Image source: Figure 1. Quarterly Market Summary. Source: ATX Advisors. Retrieved from

Closer to Home: South African Markets

In the second quarter of 2023, South Africa faced a complex economic status influenced by five key indicators: GDP growth, earnings, interest rates, inflation, and central bank policy. The nation achieved a modest 0.6% economic growth, driven primarily by the manufacturing and finance sectors. This growth, however, was overshadowed by challenges such as declining real earnings and high unemployment rates.

Rising interest rates (the rate at which the central bank lends money to commercial banks, known as the “repo rate”) had a significant impact, leading to decreased property sales and increased defaults among homeowners. Mounting inflation, particularly in fuel and food prices, eroded consumer confidence, as reflected by the Consumer Confidence Index’s drop to minus 25 points in Q2 2023.

To address these challenges, the South African Reserve Bank maintained the repo rate at 8.25%, in line with analysts’ expectations, influencing central bank policy. South Africa faced both external risks, such as weak commodity prices and a potential global economic slowdown, and domestic risks, including energy crises, operational inefficiencies, and political uncertainties.

Economic Growth still underpinned by Energy Crisis & Bad Debt

Despite the economy’s 0.6% growth in Q2 2023, significant challenges persisted. Investment in machinery and equipment, especially in renewable energy, saw a 3.9% increase from the first quarter. Nevertheless, ongoing load shedding, 475 basis points in interest rate hikes over 18 months, and high inflation rates continued to burden the nation. Household incomes lagged behind, leading to a surge in bad debts, with over 70% of new credit applications being declined.

For South African citizens, this economic landscape meant grappling with stagnant wage growth, reduced purchasing power, and an uncertain job market. It underscored the importance of prudent financial planning and investments to weather economic uncertainties.

To thrive in this complex economic environment, citizens needed to focus on financial resilience, while investors faced the delicate task of balancing opportunities and risks, emphasising sustainable investing and diversified portfolios.

Looking Forward into Q3: What Can Investors Do?

In Q3 2023, the global economy is showing signs of softening, with some regions facing challenges. While the United States exhibits resilience, China’s recovery is slower than expected, and the eurozone remains in a technical recession. Concerns about inflation persist worldwide, prompting central banks to maintain cautious policies. Asset markets, including stocks and bonds, are anticipated to trade within specific ranges, presenting challenges for equities despite recent gains and raising questions about the attractiveness of bonds due to ongoing inflation concerns. General sentiment remains bearish among investors.

At the start of Q3 2023, South Africa is grappling with economic challenges. The Absa Purchasing Managers’ Index (PMI) has already fallen below the neutral mark, signifying a contraction in the manufacturing sector due to issues like load shedding and supply chain disruptions. The broader economic picture remains grim, with the S&P Global PMI indicating ongoing contraction driven by inflation and waning confidence. While unexpected trade deficits in June caused concern, robust vehicle exports offer some hope. Lingering problems in electricity generation and intermittent load shedding are clouding Q3’s economic outlook, possibly influenced by Q2 issues. Despite these challenges, economists are cautiously optimistic about an improved full-year economic performance, expecting lower inflation and potential interest rate cuts ahead.

Investor Tips

  • Exercise Caution with Private Assets: Approach private asset investments with caution due to a slowdown in fundraising and valuations, which may worsen if a recession unfolds.
  • Embrace Long-Term Trends: Consider investments within private assets that align with enduring trends and provide diversification benefits compared to traditional investments.
  • Diversify Your Portfolio: Diversify your investment portfolio by exploring different private asset classes, with a particular focus on opportunities in private debt and credit alternatives.
  • Stay Informed and Prioritise Sustainability: Keep yourself well-informed about global events and market dynamics, especially in response to rising interest rates. When making investment decisions, prioritise sustainability and impact considerations.


In conclusion, approach your financial future with a clear perspective, and if you need assistance in interpreting this information on the markets into actionable strategies, contact TVC for expert guidance.

At TVC Wealth and Health Managers, we know how tough it can be when volatility peaks. 

Working with a professional Financial Advisor is the surest way to make your money work for you and accumulate wealth. Contact us today! (via our message form or drop us a WhatsApp via the ChatBox below)

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