2019/10/25 00:00:00

September was a risk on-month globally. This was supported by the US Federal Reserve cutting rates by 25 basis points and the European Central Bank (ECB) reducing rates further into negative territory to -0.5% from -0.4%. The ECB added additional stimulus into the European economy by implementing indefinite quantitative easing. From November it will buy €20 billion worth of bonds on a monthly basis. Although the Fed did cut rates, there remained divergent views as to the appropriate policy path. On the back of monetary policy easing the MSCI World Index delivered 1.94% (in US Dollars) and the MSCI Emerging Markets (EM) Index delivered 1.55% (in Dollars). Due to lower global bond yields, the search for yield continued, with emerging market bonds as measured by the JPMorgan EM Bond Index delivering 0.18% (in Dollars), while developed market bonds lost 1.30% (in Dollars). Global property continues to benefit from the low global interest rates, delivering 2.46% (in Dollars). Locally, the South African economy managed to escape a technical recession after GDP grew at 3.1%. This was driven by growth in the primary sector and mining, which increased 9.7% and 14.4% respectively. Although GDP was positive, the headwinds facing the South African economy were confirmed when the RMB/BER Business Confidence Index fell to a 20-year low. The South African Chamber of Commerce and Industry declined to 89.1 – the lowest since April 1985. On the back of this, South African equities had a muted month, delivering 0.19% (in Rands). The Top 40 was flat, while small caps delivered a stellar 2.21% (in Rands). Local bonds delivered 0.51% (in Rands), underperforming cash slightly, which delivered 0.57% (in Rands). Local property delivered 0.3% (in Rands) and inflation-linked bonds delivered 0.39% (in Rands).