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January 2021 economic update

The rand depreciated by just under 3,5% to end the month at R15.15 to the US dollar.

If you blinked, you may have missed it. January 2021 has come and gone. Apparently, time not only flies when you’re having fun but also when you are trapped in the continuing drama that is life under global lockdowns.

  • January was a relatively boring month for the US stock markets with only one interesting story to tell, that of GameStop. Never heard of it before? Neither have we until some amateur day traders with one thing in common – their 2,2-million-member Reddit forum – decided to stick it to Wallstreet. They noticed that there were massive institutional short positions against the supplier of gaming consoles and memorabilia and decided to push the price up to drive these nasty institutions out of their positions. So many individuals were persuaded to buy the share, that its price went from $39 to $348 in the 10 days. Where will it end? We don’t know yet, but it will probably be ugly.
  • While this may be amusing to watch from afar, the reality is that not only Americans, but many people globally, are turning to more desperate measures like direct stock market and forex trading (activities reserved for the highly trained even just a few years ago) in an attempt to generate income to make up for spiralling global unemployment.
  • US unemployment is now at 6.7%. While down from its peak of around 15% in May last year, unemployment has still doubled since the end of 2019, spelling trouble for the US growth outlook.
  • During its first month free of the European Union, the UK navigated their new reality. Focussed on dismal Covid-19 numbers, the day-to-day practicalities of being out of the union probably did not get the media attention it deserved. To name a few; online shopping from the EU is more expensive all of a sudden, smaller UK businesses are not coping with the red tape of selling their products to the EU, Northern Ireland shoppers are facing empty shelves, trucks on the road are half empty. These all seem to be minor/temporary niggles, but if these sorts of issues are not resolved, it could be a long road back to growth in an already difficult economic environment.
  • Extended furlough schemes seem to be keeping unemployment in the UK relatively low at 5%. December retail sales numbers were up from November, but still at their worst levels in 25 years.
  • European markets saw a slight drop during the month with many European countries still firmly in the grip of the pandemic. Germany and France (Europe’s largest economies now that the UK is no longer in the union) saw a slide in consumer sentiment.  Confident consumers are generally a leading indicator of strong spending, which in turn leads to economic growth.
  • No major global central banks amended their interest rates during the month of January, with our local Reserve Bank also sitting tight for now.
  • After a slight reprieve in December, South Africans faced load shedding again in January, serving as another reminder that, while our stock market enjoyed a very strong month, the risk remains on the downside.
  • The rand depreciated by just under 3,5% to end the month at R15.15 to the US dollar. Bad news for importers, but good news for any investors with some offshore exposure in their portfolios.
  • One-month index movements:
    • JSE All Share Index: 5.6%
    • S&P 500 (US): -1.2%
    • FTSE (UK): -0.8%

ADVISOR PROFILE

Michael Haldane

Global & Local Investment Advisors

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COMMENTS   1

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This is such a biased and bad economic review. You can see this advisor generated money from offshore portfolios. His clients must be doing so badly that he has to mention the rand depreciating by 3.5%. Well guess what, it has appreciate to R14.9 so it has appreciated by 4%. Include that in your mediocre review.

End of comments.

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