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August 2021 economic update

Federal Reserve Chairman Jerome Powell stressed that there was no hurry to increase interest rates.
  • As the Covid 19 pandemic has negatively impacted the finances of numerous households the government has proposed a two-bucket system for retirement which will allow pre withdrawals from preservation funds. It is expected that these changes will be effective in 2022. Labour federation Cosatu has proposed 30% or R30 000 in retirement savings be accessible so as not to deplete members’ entire savings.
  • On August 18 the JSE was down for five and half hours. The reason is because of significantly higher trading volumes on August 17 due to large deals between Nasper and Prosus, after they announced a share swap agreement which includes a trading record of approximately R145 billion.
  • China industrial production has taken a hit due to the spread of the delta variant and catastrophic flooding in central China which has led to losses of approximately $2.1 billion. This has slowed down the industry at about 6% more than last year.
  • US Food and Drug Administration (FDA) government agency has given the Pfizer vaccination full approval. Prior to this the US only authorised the vaccine for emergency use.
  • The US finally withdrew from Afghanistan as of August 30 after its 20-year involvement in the forever war. The withdrawal caused a rush at the Kabul airport as people attempted to leave Afghanistan. A suicide bombing on August 26 saw 13 US officials killed at the airport. Since the conflict began in 2001 the US has spent approximately $1 trillion to finance the war. The US borrowed heavily and will pay more than $600 billion in interest on those loans by 2023. The remainder of the debt will take years to repay.
  • In August the UK’s FTSE 100 was negatively impacted by retail, insurance and energy stocks, although the steady employment rate helped limit the losses.
  • A number of high street businesses have reported worrying stock shortages in the UK with restaurant chains Nandos and KFC running out of chicken and McDonalds struggling to make milkshakes.
  • The rollout of vaccinations in Europe’s rich economies appears to have reduced infections and hospitalisations.
  • The Euro Stoxx600 has continued to trade positively and has ended with an increase of approximately 2.4% since February 2021. This is its seventh straight month of gains and is considered its longest winning run in over eight years.
  • Jerome Powell, the chairman of the Federal Reserve, took a cautious stance and announced a potential reduction of stimulus. The speech was closely watched for signs of the Federal Reserve’s plans to reduce bond-buying that helped support the pandemic recovery and any indications of increases in interest rates. But Powell stressed that there was no hurry to increase interest rates.
  • After sliding to its lowest level in five months of R15.39 per dollar, the rand is around R14.50, indicating the volatile nature of the currency that is a proxy of sentiment towards emerging markets because of its highly liquid status. It closed the month up 0.34% at R14.51 to the dollar.
  • One month index movements:
    • JSE All Share Index: -2.24%
    • S&P 500 (US): 2.90%
    • FTSE (UK): 1.24%

ADVISOR PROFILE

Michael Haldane

Global & Local Investment Advisors

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