December 2020 economic review
Global markets performed favourably over the December period after Donald Trump signed a much needed $1.4 trillion spending bill and an accompanying $900 billion stimulus package. The markets also reacted well to the UK-EU trade deal that was signed on 30 December, putting an end to the idea of a no-deal Brexit. Despite recent events at Capitol Hill, the markets remain upbeat as the Democrats have taken control of the US Senate, making it easier for Biden to get a stimulus package through Congress and optimism over a vaccine remains a contributor to the performance.
The MSCI World Index returned 4.24% (USD) on a month-to month basis and had an annual return of 15.9% as compared to a return of 27.67% in 2019. The S&P 500 also had strong gains with a month-to-month return of 3.84% (USD). The FTSE 100 (£) was up 3.86% and the Euro Stoxx 50 (€) returned 1.78% on a month-to-month basis. The MSCI Emerging Markets Index returned 7.25% (USD) on a month-to-month basis, ending the year higher, at 18.38%, than its developed markets counterpart.
As South Africa enters a stricter lockdown period given the sharp rise in the number of new COVID-19 cases, the markets remain largely unaffected as the country’s Q3 (Quarter 3) GDP data came out favourably compared to previous estimates and the country has secured a vaccine that is expected to arrive early this year. The vaccine will potentially provide much needed relief to the hospitals experiencing high patient volumes and ultimately get the country back on track to an economic recovery.
The FTSE/JSE All Share Index closed the month with a return of 4.24% and ended the year (2020) with a return of 7.00%. Property is still on the road to recovery as the SAPY returned 13.68% m/m, but it ended the year with a less than desirable return of -34.49%. On a sectoral basis, Basic Materials, Industrials and Financials returned 9.48%, 2.02% and 8.33% respectively. The ALBI returned 2.44% m/m and 8.65% for the year. Cash (STeFI) returned a mere 0.31% m/m but returned 5.39% for the year.
The rand strengthened against the US dollar, the pound sterling and the euro at 5.36%, 2.90% and 3.01% respectively on a month-to month. On a yearly basis the rand weakened against most major currencies, coming in at -4.80% against the US dollar, -7.74% against the pound sterling, -12.66% against the euro and -5.00% against the Japanese yen.