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April 2021 economic update

The US Federal Reserve kept interest rates unchanged in April, signalling that concerns about the economic recovery in the US persist.

The biggest surprise during April was that South Africa managed to avoid the dreaded third wave that everyone thought was inevitable…so far. Word among the experts is that we are not out of the woods yet, but the current Covid infection numbers are encouraging. This is in the face of vaccine chaos and controversy not only in SA but in many countries around the world. Focusing on financial data is much less stressful by comparison!

  • Markets continue to roar ahead unabated with all major global indices enjoying another month of strong returns. There are plenty of graphs out there that may make you think that all is good in the world again – world trade volumes are flourishing, and many countries are gradually coming out of Covid lockdowns, but this does not mean there is nothing to be concerned about.  The situation in countries like India and Brazil reminds us that we are still in the depths of the pandemic and that global markets still have much to be concerned about.
  • The US Federal Reserve kept interest rates unchanged in April, signalling that concerns about the economic recovery in the US persist despite a rapid improvement in employment numbers. Inflation concerns also emerged again following another $1.8 trillion Biden stimulus package at the end of April. The Biden administration proposes to pay for these packages by hiking taxes of both high-net-worth individuals as well as corporates.
  • The Wall Street Journal reports that revenue at Apple, the world’s most highly valued company, jumped 54% to the highest level it has ever hit for the first three months of the year, sending its share price to new all-time highs.
  • News out of the UK was quite messy this past month with both the current and former Prime Ministers in the spotlight for all the wrong reasons. Boris Johnson profusely denies allegations that his 10 Downing Street renovations were initially paid for by Conservative Party donor funds, while it came to light that former Minister David Cameron rather shamelessly lobbied with various ministers for Greensill Capital, a company in which he reportedly holds share options worth millions of pounds, to benefit from government-back loans under the UK Covid corporate financing facility.
  • The political soapy detracted from major strides in both the Covid situation and the economic data in the UK. Business activity enjoyed a sharp rebound in April with retail activity accelerating as the UK gradually came out of lockdown, underscoring a strong rally in the UK’s FTSE 100 during the month.
  • Sars announced tax collections of R138 billion ahead of its initial target for the 2021 tax year, ascribing the excess to an improving economy with industries such as mining especially boosting collections. An ominous warning was made to individuals whose lifestyles are out of sync with their declared assets and income, with Sars planning to target under-declaring taxpayers in the coming year.
  • While local markets were off to a strong start, they could not hold on to the strong gains of the first half of the month. The JSE still managed to end the month up just over half a percent, continuing the winning streak enjoyed since the crash in March 2020. We’ll have to see what May brings – seven out of the last 10 May’s saw a drop in the markets. Will “sell in May and go away” turn out to be a self-fulfilling prophesy?
  • Despite a tough last day, the rand had another strong month ending April at R14.51 against the US dollar.
  • One month index movements for the month:
    • JSE All Share Index: 0.68%
    • S&P 500 (US): 5.24%
    • FTSE (UK): 3.82%

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Michael Haldane

Global & Local Investment Advisors

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