U.S. inflation was front-of-mind amongst investors this week, with the hope that the August data release would provide some insight into the Federal Reserve’s policy meeting next week. Key to the Fed’s outlook on when to taper monthly bond purchases and hike interest rates, remains the debate as to whether inflation is transitory or structural.  Softer-than-expected U.S. inflation data released on Tuesday eased short-term expectations.

U.S. headline inflation rose 0.3% month-on-month, a touch below the 0.4% consensus, while core inflation (excluding food and energy sectors) rose by 0.1% (consensus 0.3%). The year-on-year rates slowed to 5.3% from 5.4% for headline inflation while core inflation slowed to 4.0% from 4.3% – a more benign outcome than expected. In contrast, retail sales surprised to the upside, with August retail sales (excluding the auto sector) increasing by 1.8%, compared to expectations for a small decline.

China’s economy weakened further in August after regulatory tightening and stringent measures to curb another Covid outbreak weighed on consumer spending and travel. Retail sales growth slowed sharply to 2.5% from a year ago, missing consensus. Industrial output growth decelerated to 5.3%, also below estimates. Fixed-asset investment in the first eight months was largely in line with projections, rising 8.9%.

Meanwhile, KFC operator Yum China Holdings said on Tuesday its adjusted operating profit would take a 50% to 60% hit in the third quarter as the spread of the delta variant in China led to restaurant closures and “sharply reduced sales.

UK Inflation increased by 3.2%, the highest figure in almost a decade, pushed up by higher food and restaurant prices. Unemployment decreased to 4.6% in July. This compares to a registered reading of 4.7% in the prior month.

Staying with the UK, a report has shown that Covid-19 killed 640 fully vaccinated people in England in the first half of this year, or only 1.2% of the total 51,281 Covid-19 deaths in England between Jan. 2 and July 2.

Italy will require all workers to have a valid Covid-19 passport as Prime Minister Mario Draghi moves to set the toughest vaccination requirements in Europe.

Except for the Nikkei 225 Index (+0.39%), global equities were softer this week. In the U.S., the Dow Jones (-0.07%), S&P 500 (-0.57%) and Nasdaq (-0.47%) were all weaker. Similarly, the Euro Stoxx 50 (-0.95%), FTSE 100 (-0.93%) and Shanghai Composite Index (-2.41%) were all weaker.

Market Moves of the Week:

With South Africa’s 2021 Municipal Elections going ahead on 1 November, a corruption survey released this week suggests that corruption in SA has got worse under Cyril Ramaphosa’s administration, in contrast to much more positive perceptions when he first entered office. This is according to the 2021 Afrobarometer survey, an independent pan-Africa research network that interviewed 1,600 South Africans in May and June this year.

Stats SA reported that South Africa’s retail sales decreased by 0.8% year-on-year in July 2021. The largest negative annual growth rates were recorded for retailers in household furniture, appliances, and equipment (-10.2%).

The JSE All Share Index ended the week down -2.23%, led lower by the resource (-6.92%) and industrial (-0.80%) sectors, whilst financial shares (+1.22%) managed to end the week in positive territory. By Friday close, the rand was trading at R14.74 to the U.S. Dollar, weakening against all the major developed currencies this week.

Chart of the Week:

In recent months, an ongoing debate amongst investors and central banks has focused on whether higher inflation is transitory or structural. Because of the effects of the Covid-19 shutdown whereby demand was cut off and prices collapsed, an unnaturally low base was created, ensuring high year-on-year inflation 12 months later. One way to compare inflation is to rather look at 24-month inflation rather than 12-month inflation rates. The chart shows two-year inflation going back 70 years. On this basis, the rate since August 2019 is nothing to write home about yet.

Whilst volatility is likely to continue amid current market uncertainty over the coronavirus pandemic, our message to all investors remains the same – stay calm in making decisions that are aligned with your long-term goals, not current market conditions. In any market environment, we strongly believe in the importance of having a portfolio that contains a variety of asset classes, including stocks and bonds, balanced in a way that reflects the investors risk tolerance and investment timeline.

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell or an indication of trading intent on behalf of any LNKD product. LNKD Investment Managers is an authorised financial services provider (FSP 51257).

The August producer prices index released on Friday, had its biggest advance on record since 2010, with wholesale costs for businesses rising by 8.3% on an annualised basis and 0.7% for the month. This hot print, concerns over the spreading Delta variant, coupled with last week’s poor job report – which the S&P500 and Dow still haven’t recovered from – intensified investors’ worries about a slowing economy facing rising inflation. Investors will be eagerly awaiting the more crucial consumer price index for August, set to be released on Tuesday next week. This upcoming print is likely to shape investor sentiment going forward. 

In other U.S. economic related news, Treasury Secretary Janet Yellen stated that extreme measures to avoid breaking the congressionally mandated federal debt ceiling were likely to be exhausted in October and reiterated her plea for legislators to take action. 

On Thursday, U.S. President Joe Biden ordered all large employers to require workers to either be vaccinated or submit to weekly testing, while vaccination would be compulsory for all executive branch employees, federal contractors as well as health-care workers. Federal employers who fail to comply may be fired.

President Biden and China’s Xi Jinping spoke by telephone for 90 minutes on Thursday night as both sides look to ease U.S. – China relations. The White House stated that “The two leaders had a broad, strategic discussion in which they discussed areas where our interests converge, and areas where our interests, values, and perspectives diverge.” They also said the two sides “agreed to engage on both sets of issues openly and straightforwardly,” and “discussed the responsibility of both nations to ensure competition does not veer into conflict.”

The European Central Bank (“ECB”)  announced it is set to trim pandemic bond purchases in the final quarter of 2021, but ECB President Christine Lagarde added that it didn’t indicate a winding down in stimulus. In addition, the ECB raised its forecast for 2021 economic growth from 4.6% to 5.0% and its inflation estimate to 2.2%, up from 1.9%.

In the UK, Prime Minister Boris Johnson secured parliamentary approval from the House of Commons to raise taxes, to the highest level on record, to fund changes to social care and the National Health Service.

Major U.S. indices pulled back over the week as both growth and inflation weighed on investor sentiment. For the week, the S&P 500 ended down 1.69%, while the Dow fell 2.15% in its second negative week in a row and the technology laden Nasdaq ending 1.61% lower. Stocks in Europe declined amid uncertainty over the future state of the economy, with the Euro Stoxx 50 ending 0.75% weaker. The FTSE 100  also declining 1.53% for the week. Asian indexes had a strong week, with the Nikkei 225 up 4.30% and Shanghai Composite Index up 3.39%. Brent crude (0.58%) managed a slight gain while Gold dipped to close the week 2.28% weaker. 

Market Moves of the Week:

South Africa’s Gross Domestic Product rose 1.2% for the three months ending June, compared to 1% in the previous quarter, as coronavirus restrictions were eased. The second quarter growth was primarily driven by a more robust growth performance of 6.9% q/q in the transport sector, 2.5% q/q in the personal services sector and 6.2% q/q in the agricultural sector. The economy managed to grow 19.3% from a year earlier, the first year on year increase in five quarters. In other economic related news, South Africa’s current account balance grew in the second quarter to the largest surplus ever, reported by the SARB.

There is talk in numerous circles that that the South African Government is preparing to ease coronavirus restrictions further, as cases continue to decline across all the provinces.  

The JSE all-share index ended the week 3.13% weaker, following a global risk-off sentiment, with the resource (-5.00%) and listed property (-2.96%) sectors taking the biggest knock. The Rand managed to strengthen over the week to close at R14.21 to the USD.

Chart of the Week:

Growth and Value stocks both had a good run last year as the U.S. economy expanded due to stimulus – with growth leading the way. For much of this year, the tide appeared to have turned decisively in favour of value stocks which benefitted from the opening and expanding economy. However, this seems to no longer be the case as Growth stocks surge ahead.  

Whilst volatility is likely to continue amid current market uncertainty over the coronavirus pandemic, our message to all investors remains the same – stay calm in making decisions that are aligned with your long-term goals, not current market conditions. In any market environment, we strongly believe in the importance of having a portfolio that contains a variety of asset classes, including stocks and bonds, balanced in a way that reflects the investors risk tolerance and investment timeline.

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell or an indication of trading intent on behalf of any LNKD product. LNKD Investment Managers is an authorised financial services provider (FSP 51257).

Major US indices retreated on Friday after the August jobs report came in short of expectations with the U.S. economy creating 235,000 jobs in August, a sharp deceleration from previous months and fell well below economists’ expectations for 733,000 positions. Still, the number of job openings remains at record levels, and hiring is expected to stay solid in the coming months.

The unemployment rate fell to a new pandemic-era low of 5.2% from the 5.4% recorded in July.

Also, wages continued to accelerate, rising 4.3% on a year-over-year basis and 0.6% on a monthly basis. Estimates had been for 4% and 0.3% respectively.

If the jobs data gets softer, that could prompt Fed officials to wait until 2022 before starting to taper its bond purchases maintaining its loose monetary policy for longer.

Friday’s report provided numerous signs that the delta variant had a depressive effect on job growth with leisure and hospitality jobs, which had been the primary driver of overall gains at 350,000 per month for the past six months, stalled in August as the unemployment rate in the industry ticked higher to 9.1%.

Data on Tuesday showed euro zone inflation accelerated more than forecast to 3% in August—up from 2.2% in July. Higher energy and food prices drove the increase, according to the EU’s statistics agency.

European shares were marginally stronger on the week with the pan-European STOXX Europe 50 Index ending the week 0.26% higher while the UK’s FTSE 100 Index was -0.14% lower.

News of Japan’s Prime Minister Yoshihide Suga’s resignation contributed to a strong rally with the Nikkei 225 Index soaring 5.38%. Suga’s popularity has plummeted in recent months amid mounting criticism of his governments handling of the coronavirus pandemic. Former foreign minister Fumio Kishida has emerged as the early front-runner, a year after he was defeated by Suga in the contest to replace Shinzo Abe.

Chinese stocks rose for a second consecutive week with the Shanghai Composite Index gaining 1.69% for the week. On Thursday, President Xi Jinping announced the launch of a new stock exchange in Beijing. The bourse will serve innovative small and medium-sized enterprises (SMEs) and is part of a reform of Beijing’s New Third Board.

Market Moves of the Week:

South Africa’s top court dismissed an application by the Electoral Commission to postpone local elections due on Oct. 27, court documents showed on Friday. In its ruling, the court set aside the government’s decision to have elections on Oct. 27, saying instead the polls must go ahead between that date and Nov. 1.

The ANC plans to use Friday’s Constitutional Court order to argue that the Electoral Commission of SA (IEC) must reopen the candidate registration process. The party failed to register hundreds of candidates for the election, meaning it cannot participate in more than a third, of SA’s 278 municipalities.

In company news, Discovery announced the introduction of mandatory Covid-19 vaccinations for its staff from next year, the announcement is expected to pave the way for other large companies to follow suit.

The FTSE/JSE All Share Index closed -1.88% lower on the week, as losses in the resources sector (-5.81%) drove the overall index lower. The rand strengthened further on Friday as the big miss on the U.S. jobs report boosted emerging-market currencies. The rand had gained strongly against the US dollar earlier in the week, after a dovish speech by Fed Chair Jerome Powell at Jackson Hole last Friday suggested that the U.S. central bank was in no rush to raise interest rates.

Chart of the Week:

The US added 235,000 payrolls in August, badly missing the median estimate of 733,000 added jobs, while the unemployment rate dropped to 5.2% from 5.4%, in line with estimates. Jobs data is important because that is one area where Fed Chairman Jerome Powell said they would like to see more improvement before the central bank can decide to slow its bond purchases. It now appears unlikely that the Fed will announce a taper at the September meeting but possibly look to its November meeting to start reducing its asset purchases.

Whilst volatility is likely to continue amid current market uncertainty over the coronavirus pandemic, our message to all investors remains the same – stay calm in making decisions that are aligned with your long-term goals, not current market conditions. In any market environment, we strongly believe in the importance of having a portfolio that contains a variety of asset classes, including stocks and bonds, balanced in a way that reflects the investors risk tolerance and investment timeline.

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell or an indication of trading intent on behalf of any LNKD product. LNKD Investment Managers is an authorised financial services provider (FSP 51257).

Headlines swung squarely to Federal Reserve policy and geopolitical uncertainties this week, with investors anticipating Fed Chair, Jerome Powell’s Jackson Hole conference speech on Friday. Whilst market participants hoped that the event would provide insights into the Fed’s policy outlook, the speech turned out to be a non-event as Powell did not signal any deviation from the central bank’s July assessment of economic conditions or outlook.

Powell said the U.S. economy had made enough “substantial progress” to warrant tapering of monthly bond purchases this year, though the central bank would be assessing data from the raging delta variant of the coronavirus. Powell also stressed the Fed won’t be in a hurry to begin raising interest rates after the wind-down of bond purchases.

President Biden vowed to continue evacuations from Afghanistan after explosions in Kabul killed 70 people, including 13 U.S. service members, and he said the U.S. will retaliate against those responsible. The attack claimed by the Islamic State terrorist group comes after more than 100,000 people had been evacuated from Afghanistan since the Taliban moved to take the capital city.

The U.S. Food and Drug Administration (FDA) fully approved the Pfizer-BioNTech coronavirus vaccine for use in people 16 and older this week. At the same time, a growing number of U.S. employers are imposing coronavirus vaccine mandates on workers. Goldman Sachs requires bankers to prove they’ve been vaccinated. Other U.S. companies include CVS, Chevron, and Hess. Delta Air Lines even said it would levy a $200 monthly charge on workers who refuse to take the vaccine.

The China Securities Regulatory Commission (CSRC) pledged to cooperate with the U.S. regarding the auditing of Chinese companies that trade on stock exchanges in the U.S. The dispute stems from China’s refusal to provide full access to the financial data of Chinese companies that trade in the U.S. on national security grounds. The Securities and Exchange Commission (SEC) pledged to strictly enforce a three-year deadline that requires Chinese firms to permit inspections of their financial audits. If businesses refuse, their shares could be delisted from the New York Stock Exchange and Nasdaq as soon as 2024.

European economic data was strong in August, suggesting that the eurozone remains in expansionary territory. The Composite Purchasing Managers’ Index (PMI) came in at 59.5, with growth in both the manufacturing and services sectors remaining robust.

Meanwhile, UK’s composite PMI slowed to 55.3 in August compared to 59.2 in July, largely driven by a slowdown in the services sector. The UK will roll out a program to deliver booster shots of the coronavirus vaccine to the most vulnerable populations, beginning in early September, and later expand eligibility to those 70 years and older.

It was a strong week for global equities with major indices posting decent gains. In the U.S., the Dow Jones (+0.96%), S&P 500 (+1.52%) and the Nasdaq (+2.82%) all ended the week stronger. Similarly, in Europe, the Euro Stoxx 50 (+1.05%) and FTSE 100 (+0.85%) posted positive returns, along with China’s Shanghai Composite Index (+2.77%) and Japan’s Nikkei 225 Index (+2.32%).

Market Moves of the Week:

South Africa’s unemployment rate advanced to a record 34.4% (or 7.8 million) in the 2^nd quarter of 2021. Trends show that unemployment is concentrated among the youth. Nearly two-thirds (64.4%) of those aged 15 to 24 are unemployed, and 42.9% of those aged 25 to 34 are unemployed. South Africa’s unemployment rate is now the highest of 82 countries tracked by Bloomberg.

The JSE All Share Index ended the week up +2.48%, with all three of the major sectors leading the market higher. The resource (+4.64%) and financial (+3.25%) sectors were particularly strong, compared to the industrial sector (+0.67%). By Friday close, the rand had strengthened to the U.S. Dollar, trading at R14.68.

Chart of the Week:

Stats SA has finalised a comprehensive overhaul of its national accounts. The latest GDP rebasing and benchmarking exercise has resulted in an upward revision in the size of the economy, showing that the economy is 11,0% larger in 2020 than previously estimated. In the 10 years between 2011 and 2020, the percentage difference between the previous and revised levels averaged 9,6%. If the 2020 World Bank figure for South Africa is adjusted by Stats SA’s upward revision of 11,0%, SA’s economy still lags Nigeria and Egypt in size.

Whilst volatility is likely to continue amid current market uncertainty over the coronavirus pandemic, our message to all investors remains the same – stay calm in making decisions that are aligned with your long-term goals, not current market conditions. In any market environment, we strongly believe in the importance of having a portfolio that contains a variety of asset classes, including stocks and bonds, balanced in a way that reflects the investors risk tolerance and investment timeline.

As always, we appreciate your support and value your trust in LNKD Investment Managers..

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell or an indication of trading intent on behalf of any LNKD product. LNKD Investment Managers is an authorised financial services provider (FSP 51257).

On Monday, the S&P 500 index reached a new record high of 4480, which is more than double its COVID intraday trough of 2192 on 23 March 2020. This created the fastest bull market rally since WW2. However, as the week progressed, stocks pulled back due to hawkish comments from the Fed, weaker than expected retail sales and worries that growth might be reaching its peak. A decline in China’s July factory output and retail sales growth also seemed to hamper investor sentiment.

The Fed, this week, released the minutes of their latest policy meeting. They concluded that they managed to attain their inflation goal however still required progress on their employment mandate. On the matter of tapering their monthly bond-buying, most participants “judged that it could be appropriate to start reducing the pace of asset purchases this year.” The members also importantly highlighted that there is no link between tapering bond purchases and increasing the interest rate target range. 

In other U.S. economic related news, U.S. retail sales declined 1.1% in July, which disappointed investors and prompted questions over U.S. growth and possible threats such as the delta variant and non-existent government stimulus.

In China, July’s economic data showed that economic activity slowed more than expected. The slowdown in factory output and retail sales growth shined light on the disruption that new COVID-19 outbreaks were causing across the country. Beijing’s regulatory clampdown continued to create uncertainty in the Chinese market as new data protection laws were passed during the week. 

As coronavirus restrictions eased across Europe, economic activity rose, translating to the eurozone economy growing 2% in the second quarter. Separately, Eurostat said that employment grew in the April to June period by 0.5%, in line with economic forecasts. 

In Covid-19 related news, the delta variant continues to wreak havoc across the globe. President Joe Biden’s administration is ready to offer booster shots as soon as next month, as some areas of the U.S. are seeing death rates comparable to November’s peak. New Zealand is back in lockdown after a single virus case emerged. Hong Kong clamped down on travel, requiring visitors to now spend 21 days in quarantine on arrival. While Japan is set to extend its state of emergency in parts of the country until Sept. 12. 

U.S. stocks rebounded slightly on Friday, but still closed the week in the red with all three major stock indexes finishing lower. The Dow fell 1.1% for the week, while the S&P 500 dipped 0.59% and the Nasdaq Composite edged 0.7% lower. Global indexes followed the same pattern with the Euro Stoxx 50 (-1.94%), FTSE 100 (-1.81%), Nikkei 225 (-3.45%) and Shanghai Composite Index (-2.54%) all ending the week lower. Brent crude tumbled 7.5% while Gold (0.09%) just managed a slight gain.

Market Moves of the Week:

In South Africa, finance minister Enoch Godongwana again moved to reassure international investors this week, saying that he is committed to the policy trajectory set out by his predecessor Tito Mboweni, and sees “no changes” in SA’s fiscal framework. Looking at economic data, South Africa’s headline and core inflation fell by more than expected in July. The July headline inflation print was 4.6%, down from 4.9% in June while core inflation fell from 3.2% to 3.0%. These figures surprised consensus to the downside and highlighted the possible lack of demand-side pressure in the country. Fuel inflation slowed to 15.2% y/y from 27.5% previously, but still increased 1.7% m/m while electricity prices rose 13.6% m/m.

A state run national security fund was proposed by government this week. The proposal seeks to introduce a mandatory pension and insurance system that will see employers and employees paying up to 12% of their earnings into a state-run national social security fund (NSSF). The fund will provide benefits, in the form of income protection, for all workers and their families. “However, those earning above the tax threshold will need to contribute to supplementary retirement savings and insurance arrangements to ensure an adequate replacement income.”

The JSE all-share index was down 4.86% this week, following a global sell-off seen in commodity-orientated countries. As a result, the Rand weakened to end R15.20 to the U.S. Dollar, depreciating by over 3% for the week.

Chart of the Week:

It took the S&P 500 Index just 354 trading days to double from its low back in March 2020. That makes it, by far, the fastest doubling in history. The previous record, set after the low in March 2009, the height of the financial crisis, was 540 days.

Whilst volatility is likely to continue amid current market uncertainty over the coronavirus pandemic, our message to all investors remains the same – stay calm in making decisions that are aligned with your long-term goals, not current market conditions. In any market environment, we strongly believe in the importance of having a portfolio that contains a variety of asset classes, including stocks and bonds, balanced in a way that reflects the investors risk tolerance and investment timeline.

As always, we appreciate your support and value your trust in LNKD Investment Managers..

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell or an indication of trading intent on behalf of any LNKD product. LNKD Investment Managers is an authorised financial services provider (FSP 51257).

U.S. equities rounded off the week with modest gains, with the Dow Jones Industrial Average and S&P 500 ending stronger while the tech-heavy Nasdaq ended marginally weaker.

On Wednesday the US labor department reported that the July consumer price index rose 5.4%, while core inflation increased 4.3% year on year. Core inflation (excludes petroleum and food prices) rose less than expected by 0.3% for the month of July versus June’s 0.9% increase. Core inflation is regarded as the more reliable measure given the volatility of energy and food prices. The slowdown in core inflation aligns with the Federal Reserve’s view that the previous surge in core inflation would prove to be more transitory rather than a secular upswing. If inflation were to persist then it’s more likely that policymakers will need to reign in stimulus. Alternatively, if inflation settles then it becomes more likely that monetary and fiscal accommodation will remain longer.

The U.S. Senate passed a $1 trillion infrastructure package aimed at rebuilding traditional transportation infrastructure, improve access to broadband internet, and upgrade the electric grid and water systems. The bill will now make its way to the House for approval.

The UK economy grew at a rate of 4.8% in the second quarter after shrinking 1.6% in the first, as the easing of COVID-19 restrictions and a rapid vaccine rollout drove a solid economic rebound. The Bank of England expects the economy to regain its pre-COVID size by the end of 2021.

So far about 90% of the companies in the S&P 500 have reported actual revenue numbers for the second quarter. Of these companies, 87% reported actual revenues above the mean revenue estimate and 13% reported actual revenues below the mean revenue estimate. In aggregate, these companies reported revenues that were 4.9% above expectations, according to Factset.

European counters advanced for the week as investors focused on stronger corporate earnings and the economic recovery. The pan-European STOXX 50 Index ended the week 1.32% higher while the UK’s FTSE 100 Index added 1.34% on the back of the improving growth outlook.

Japan’s Nikkei 225 index was up a modest 0.56% for the week. Coronavirus infections continue to rise in Japan with rising pressure on government to tighten restrictions further. Chinese stocks were similarly positive on the week with the benchmark Shanghai Composite recording a gain of 1.68%. The prospects of increasing regulation in China affecting key parts of the economy continues to weigh on investor sentiment.

Market Moves of the Week:

Newly appointed Finance minister Enoch Godongwana has moved to assure international investors that he is committed to the policy trajectory set out by his predecessor Tito Mboweni, saying on Friday that he sees “no changes” in SA’s fiscal framework.

South Africa’s health minister Joe Phaahla said on Friday he would not recommend a relaxation of COVID-19 lockdown measures despite a downward trend in infections. Phaahla said the national positivity rate, which gives an indication of how widespread infections are, had declined from a high of 35% in mid-July to an average over the last seven days of 19-20%.

The JSE All Share Index ended the week over 1% stronger, led higher by the resource (0.82%) and industrial (2.15%) sectors. The financial sector lagged while the listed property sector was modestly weaker for the week. By Friday close, the rand was trading at R14.73 to the U.S. Dollar, depreciating by 0.38% for the week.

Chart of the Week:

Data out Wednesday showed inflation remained elevated in July rising 5.4% year on year, although on a monthly basis there were signs that price pressures had moderated. The Labor department’s consumer-price index climbed a seasonally adjusted 0.5% in July from June, a significantly slower pace than its 0.9% increase reported in June. Core inflation which excludes energy and food prices fell from 4.5% to 4.3% from a year before.

Whilst volatility is likely to continue amid current market uncertainty over the coronavirus pandemic, our message to all investors remains the same – stay calm in making decisions that are aligned with your long-term goals, not current market conditions. In any market environment, we strongly believe in the importance of having a portfolio that contains a variety of asset classes, including stocks and bonds, balanced in a way that reflects the investors risk tolerance and investment timeline.

As always, we appreciate your support and value your trust in LNKD Investment Managers..

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell or an indication of trading intent on behalf of any LNKD product. LNKD Investment Managers is an authorised financial services provider (FSP 51257).

Stocks touched new highs again this week, with the latest U.S. jobs report showing that the economy added 943,000 jobs in July.  The week started off on a down note, attributed to ongoing concerns about the delta variant of COVID-19 and worries over new regulatory measures in China.

Data published on Friday by the U.S. Bureau of Labor Statistics showed U.S. unemployment declined to 5.4% from 5.9% in June. The labor force participation rate also improved modestly to 61.7% and average hourly earnings increased by 4.0%, compared to the market expectation of 3.8%. At the same time, more than 5.7 million Americans remain unemployed compared with pre-pandemic levels.

U.S. 2nd quarter earnings season continued to produce some positive surprises during the week. Analysts polled by FactSet are currently expecting second-quarter earnings for the S&P 500 to have increased by over 85% versus the year before and unusually, revenues to have grown by nearly as much.

Simon Property Group saw sales at its shopping malls and outlet centres bounce back to pre-pandemic levels in its latest fiscal quarter, as Americans shopped for clothes, shoes and other items. Chief Executive David Simon told analysts Monday that retail sales at its properties in June were comparable to June 2019 levels, and up 80% from a year earlier. 

New York City said workers and customers at indoor restaurants, gyms and some other establishments will need to show proof of vaccination. The move follows similar actions in Europe where leaders have restricted the unvaccinated as part of the strategy to encourage shots. Microsoft and Walmart have also made vaccines compulsory for employees returning to the office.

Despite this positive backdrop, the delta variant of COVID-19 threatens much of the progress made, as the U.S. enters its 5th wave. The variant has now been detected in 124 territories worldwide, and there were at least 640,000 new cases and 10,000 deaths on Aug. 3 alone, with a surge in reported cases also taking place across China. Roughly 40% of China’s population is fully vaccinated, according to the Centers for Disease Control and Prevention, a level that falls short of herd immunity.

The U.S. Senate is heading toward a weekend vote on President Joe Biden’s $550 billion infrastructure legislation, after an attempt to pass the bill late Thursday was thwarted by disagreements over cryptocurrency regulation.

The Bank of England (BoE) kept its interest rate unchanged at 0.1% this week, announcing that it expects interest rates to rise to 0.2% in 2022 and to 0.5% by the second half of 2024. The central bank updated its forecast for inflation, which is likely to peak at 4% either late in 2021 or in early 2022. It also kept its GDP growth outlook for 2021 at 7.25%, but increased its GDP forecast for 2022 to 6% from 5.75%.

Chinese economic momentum appears to have slowed in July, with PMI readings pointing to slower economic momentum in the country’s manufacturing and services sectors. This has been largely attributed to a resurgence in COVID-19 cases in Asia together with stricter government policies announced. This week, negative comments from state media regarding the Chinese online gaming industry, hurt investor sentiment. Despite this, Chinese stocks rebounded this week after last week’s pullback.

It was a strong week for global equities with major indices posting decent weekly gains. In the U.S., the Dow Jones (+0.78%), S&P 500 (+0.94%) and the Nasdaq (+1.11%) all ended the week stronger. Similarly, in Europe, the Euro Stoxx 50 (+2.08%) and FTSE 100 (+1.29%) posted positive returns, along with China’s Shanghai Composite Index (+1.79%) and Japan’s Nikkei 225 Index (+1.97%).

Market Moves of the Week

Locally, President Ramaphosa announced the reassigning of 6 cabinet members and the appointment of 4 new cabinet ministers, including the appointment of close political ally Enoch Godongwana as his new finance minister. Given Mr. Godongwana’s training and experience, he is likely to be perceived by the market as a credible and effective policymaker. His appointment may however introduce some uncertainty into the mid-term budget until he elaborates further on his fiscal policy views and priorities.

Manufacturing PMI registered a drop to 43.5 in July (below 50.0 signals a contraction), compared with a reading of 57.4 in the previous month. This was mainly attributed to the looting and unrest that took place during July.

According to a survey conducted by Redflank Management Consultancy, small businesses need R16bn funding to recover after having stock looted in the recent wave of unrest. The survey found that two thirds of looted small businesses did not have insurance and estimate that the damage in the small and medium sector will reach R55bn. These figures dwarf the R4bn that trade & industry minister Ebrahim Patel announced had been set aside for businesses damaged in rioting. 

The JSE All Share Index ended the week down -0.43%, led lower by the resource (-1.92%) and industrial (-1.39%) sectors. The financial sector (+5.15%) outperformed, with banking stocks (+6.53%) being the major contributor. By Friday close, the rand was trading at R14.67 to the U.S. Dollar. 

Chart of the Week

Whilst global economic activity rebounds, airline seat capacity is dropping and is now just 68% of what it was in 2019. The Covid-19 pandemic has disrupted a multi-year travel expansion, fuelled by a rising number of middle-class tourists from China and Southeast Asia. The latest setback is largely attributed to the spread of the Delta variant. 

Whilst volatility is likely to continue amid current market uncertainty over the coronavirus disease, our message to all investors remains the same – stay calm in making decisions that are aligned with your long-term goals, not current market conditions. In any market environment, we strongly believe that investors should stay properly diversified across a variety of asset classes and that clients financial plan supports their long-term goals, time horizon and tolerance for risk.

As always, we appreciate your support and value your trust in LNKD Investment Managers..

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell or an indication of trading intent on behalf of any LNKD product. LNKD Investment Managers is an authorised financial services provider (FSP 51257).

This past week saw about a third of the S&P 500 companies report results and earnings, making it the busiest week of the second-quarter earnings season. Companies topped estimates at record levels with 87% of the S&P500 companies having exceeded estimates by an average of 18%. The majority of these surprises were driven by a strong rebound in demand and high profitability levels. Amazon, Apple, Google, Microsoft and Facebook, which together make up 22.5% of the S&P 500, on average doubled their earnings from last year. As a result of this outperformance, forward earnings expectations have risen at a fast pace, setting a high bar for future performance reports.  

The Fed held their July meeting this past week, the outcome of which resulted in them keeping interest rates in a target range near zero. This was expected as the Fed continues to hold steady, amidst a still-recovering U.S. economy, with Chairman Jerome Powell cautioning that the Fed still has a way to go before adjusting policy rates or its asset-purchase program. On Thursday the Commerce Department published its estimate that Gross Domestic Product rose by an annualized rate of 6.5% in Q2, which surprised to the downside relative to consensuses estimates of 8.5%. This drag on growth came from numerous factors, including a decline in government spending and a wider trade deficit, with imports rising more than exports. Despite the miss, it was still the second-fastest pace of growth since 2003 – as consumers continue to increase spending – which has left the U.S. economy even larger than at its pre-pandemic peak. 

China unveiled a regulatory overhaul of its private education sector on July 24 last week, providing reasons for the move such as greater domestic competitiveness. The overhaul looks to ban school tutoring companies from being run for profit or going public. This crackdown, coupled with investors’ concerns over future Chinese regulatory measures, caused Mainland China stocks to slump and sell off during the week. By the end of the week, Beijing stepped up measures to calm investor fears with their central bank pumping RMB 30 billion into the financial system. Their top securities regulator also privately told global financial institutions that Beijing will consider the impact on markets when it introduces new policies in the future. 

In Covid-19 related news, President Joe Biden will require federal workers to prove they’ve been vaccinated or wear masks and submit to frequent testing. Japan was forced to extend its state of emergency to the end of August following a record virus surge. The state of emergency was also expanded to areas surrounding Tokyo, despite this, the Olympics continue to take place. In the U.K., businesses say there are signs that the number of workers who are being told to self-isolate is starting to ease as infection rates fell from a week earlier. 

For the week, global stocks were down as Big Tech’s slowing growth and risks from China’s regulatory crackdown weighed on sentiment. In the U.S., all three major indices ended the week in the red with the DOW (-0.36%), S&P500 (-0.37%) and NASDAQ (-1.11%) all of their recent highs. Similarly, the Euro Stoxx 50 (-0.48%) and Nikkei 225 (-0.96%) were down moderately with the Shanghai Composite Index down sharply (-4.31%) for the week following the equity selloff. The FTSE 100 (0.07%) just managed to end positively. Brent crude rebounded strongly from the previous week (4.12%)  while Gold (0.58%) managed a slight gain.

Market Moves of the Week:

In South Africa, Finance minister Tito Mboweni elaborated this week, on the new fiscal support measures President Ramaphosa announced last weekend. The new measures imply a total fiscal cost of R36 billion, or roughly 0.7% of GDP, and are focused on short-term spending measures such as social grants (through to March 2022). On a related matter, the public-sector trade unions accepted the government’s one-year offer for public wages, which included a 1.5% salary increase and a cash allowance for the year. The amount of the cash allowance will differ depending on pay grade, backdated to April 2021. The deal will result in an incremental fiscal cost of R18 billion (0.4% of GDP) of what was budgeted. 

The new fiscal support measures will be financed out of revenue outperformance (relative to the February budget) and the wage bill’s excess costs will be financed through spending reprioritisation (details of which will be provided in the Medium-Term Budget Policy Statement). Mboweni said in an interview on Wednesday that despite opposition to spending constraints, “We are not going to go to a sovereign debt crisis for now, at least not under my watch. There is no such thing as a popular minister of finance – it doesn’t exist, it’s a contradiction in terms. You have to be unpopular.”

In Q2 2021, exports rose sharply, well above pre-Covid levels on account of positive export price dynamics, and imports rebounded more modestly according to recent monthly trade data published by SARS, causing the goods trade surplus to rise from 9.0% of GDP in Q1 to an estimated 10.8% of GDP in Q2 2021. This surplus likely provided support for the Rand over Q2 and is estimated to continue the support into Q3. The Rand strengthened over the past week to end at USDZAR 14.57, while the JSE All Share managed a meaningful gain of 1.33% driven by earnings optimism. 

Chart of the Week:

Global commodity prices have crept back up to a 10-year high, emboldening those calling for a new super-cycle. The Bloomberg Commodity Spot Index is trading at its highest since 2011, boosted in part by a surge in soft commodities with oil and copper still below recent peaks. Extreme weather across the globe has pushed the likes of coffee and sugar to multi-year highs.

Whilst volatility is likely to continue amid current market uncertainty over the coronavirus pandemic, our message to all investors remains the same – stay calm in making decisions that are aligned with your long-term goals, not current market conditions. In any market environment, we strongly believe in the importance of having a portfolio that contains a variety of asset classes, including stocks and bonds, balanced in a way that reflects the investors risk tolerance and investment timeline.

As always, we appreciate your support and value your trust in LNKD Investment Managers..

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell or an indication of trading intent on behalf of any LNKD product. LNKD Investment Managers is an authorised financial services provider (FSP 51257).

On Monday U.S. financial markets sold off as growing fears of a slowing pace of economic growth, increasing delta variant infections, and heightened fears of inflation weighed on investor sentiment. Cases and hospitalisations have been rising steadily in parts of the U.S. especially in states with low vaccination levels. Following Mondays sell-off U.S. equities staged a strong rebound, with the Dow Jones (+1.08%), S&P 500 (+1.96%) and the Nasdaq (2.84%) all ending the week firmly in the green. U.S. earning season helped improve investor sentiment over the week with strong second-quarter corporate earnings from several companies, so far results have been encouraging with 87% of those reporting beating estimates. Analysts now project second quarter year-over-year growth to total 74% and for full-year 2021 S&P 500 earnings to total $195. Investors’ next major focus is the Federal Reserve’s two-day policy meeting next week.

Shares in Europe also rebounded as the European Central Bank (“ECB”) affirmed their dovish monetary stance. The bank’s president, Christine Lagarde, issued a strong forward guidance that rates will remain at present or lower levels until the ECB sees “inflation reaching two per cent well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realized progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilizing at 2% over the medium term.” The ECB indicated that this process could involve a short period in which inflation goes moderately above this target.

In local currency terms, the pan-European STOXX Europe 50 Index ended 1.82% higher while the UK’s FTSE 100 Index ticked up 0.28%. In Japan, the benchmark Nikkei 225 Index ended the week down 1.63%, ahead of the start of the Tokyo Olympics. In China the Shanghai Composite Index rose 0.3%. Chinese education stocks plunged on Friday after reports of a government crackdown on the sector that would require home-schooling or off-campus education companies to register for non-profit status. TAL Education, Gaotu Techedu and New Oriental Education, which are listed in New York all fell by close to 60% in the first hour of trading.

Market Moves of the Week:

Financial markets’ response to South Africa’s week of violent unrest was surprisingly quiet but rating agencies did warn that the riots pose risks to SA’s economic recovery and could complicate efforts to improve public finances.
The Monetary Policy Committee (MPC) of the South African Reserve Bank (Sarb) decided to keep the repo rate unchanged at 3.5% on Thursday. Sarb governor Lesetja Kganyago said it was a unanimous decision by the MPC. Kganyago also said recent unrest and economic damage could have lasting effects on investor confidence and job creation. “The direct and indirect costs of these events will likely further slow South Africa’s economic recovery. We estimate the unrest to have fully negated the 2021 Q1 (first quarter) growth outcome.”
The inflation forecast for 2021 was revised higher by 0.1pp to 4.3% while the 2022 forecast was revised lower by 0.2pp to 4.2%. With respect to growth, forecasts remained unchanged, at 4.2% for 2021 and 2.3% for 2023, and the MPC maintained its assessment of balanced risks to the growth outlook.
After selling down 2.59% on Monday, the JSE rebounded strongly over the week gaining 2.31%. The biggest winners for the week were the resource (+3.2%) counters and the industrial sector (2.5%), while the rand continued to weaken against the U.S. dollar over the week, ending at R14,85/$.

The JSE All Share Index ended the week slightly up +0.16%, with all the major sectors moderately stronger over the week, except for the financial sector. By Friday close, the rand was trading at R14.25 to the U.S. Dollar after touching the R14,50 level earlier in the day.

Chart of the Week:

As per the chart above the trade-weighted US Dollar Index has been on an upward trend of late. Many economists expect the Federal Reserve to gradually start tightening its extraordinarily loose monetary policy on the back of a strong U.S. economic recovery and higher inflation, this coupled with the enhanced dovish stance of other major central banks, like the European Central bank and Bank of Japan, also collaborates with the dollars current positive momentum.

Whilst volatility is likely to continue amid current market uncertainty over the coronavirus pandemic, our message to all investors remains the same – stay calm in making decisions that are aligned with your long-term goals, not current market conditions. In any market environment, we strongly believe in the importance of having a portfolio that contains a variety of asset classes, including stocks and bonds, balanced in a way that reflects the investors risk tolerance and investment timeline.

As always, we appreciate your support and value your trust in LNKD Investment Managers..

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell or an indication of trading intent on behalf of any LNKD product. LNKD Investment Managers is an authorised financial services provider (FSP 51257).

U.S. inflation remained in the spotlight this week, with core consumer prices (excluding food and energy) increasing by 0.9% in June, nearly twice consensus estimates. This was also the fastest 12-month increase in the core rate (4.5%) since 1991. The ongoing debate as to whether higher U.S. inflation is transitory or permanent continues to test the Federal Reserve’s commitment to sticking to ultra-easy monetary support for the economy.

At his scheduled testimony before Congress this week, Fed Chair Jerome Powell acknowledged that the recent spike in inflation was larger than expected but repeated the Fed’s view that inflation pressures are temporary and “substantial further progress is still a way off” in terms of the Fed’s employment and inflation goals. Meanwhile, weekly jobless claims eased to a pandemic low of 360,000 in the week ended 10 July 2021.

The UK remains on course to lift its remaining COVID-19 lockdown controls on Monday. France has however implemented new social restrictions with people having to show a health pass, proving they have been vaccinated to use long-distance trains, to go out to eat and drink, and to visit shops, cinemas, and theatres.

UK inflation also surprised to the upside, increasing to 2.5% in June – the highest level since August 2018 and up from 2.1% in May.

China’s annual GDP growth rate for the second quarter came in at 7.9%, broadly in line with market expectations. Industrial production advanced by 8.3% in June, compared to expectations of a 7.8% increase with retail sales also strong, increasing by 12.1% year-on-year.

The World Health Organization called on China to cooperate in a second phase of studying the origins of the coronavirus. In the U.S. and Europe, delta-driven COVID-19 caseloads are rising, in what may be the beginnings of a fifth wave. In the U.S., death rates are rising with more than 330 Americans dying every day from Covid-19. The difference now as compared with the first four waves is that almost all victims are unvaccinated despite near-universal access to shots across the country.

For the week, global equity markets were mostly softer. In the U.S., the Dow Jones (-0.52%), S&P 500 (-0.97%) and Nasdaq (-1.87%) were all weaker. Similarly, the Euro Stoxx 50 (-0.79%) and FTSE 100 (-1.60%) were negative whilst Asian markets including the Nikkei 225 (+0.22%) and Shanghai Composite Index (+0.43%) were mildly stronger.

Market Moves of the Week:

Riots, arson and looting rocked South Africa this week. Initial indications suggest that the estimated damage ranges from R20bn to R30bn. PwC believes that the national GDP growth rate could be 0.4 percentage points lower this year due to the week of significant disruption with 50,000 jobs potentially at risk.

South Africa’s biggest oil refinery, a joint venture between Royal Dutch Shell Plc and BP Plc known as SAPREF, also shut down because of safety concerns and logistical issues. This together with parts of KwaZulu-Natal experiencing food shortages due to the disruption of supply chains, could result in higher inflation for SA if conditions continue into the coming week. Whilst the environment remains extremely volatile, the deployment of 25 000 South African National Defence Force (SANDF) members to deal with the violence and looting that has gripped KwaZulu-Natal and Gauteng is expected to bring some stability.

Despite the domestic turmoil, the JSE All Share Index (+0.22%) managed to end the week in positive territory as rand hedge stocks offset SA focused sectors. Industrial shares (+2.79%) were the clear winner, whilst the financial (-4.17%) and property sectors (-5.01%) were negatively impacted by geopolitical instability. Resource shares (-0.82%) also ended the week down. By Friday close, the rand was trading at R14.46 to the U.S. Dollar, weakening against all of the major developed currencies this week.

Chart of the Week:

The UK is a good example of how important vaccination programmes are at severing the link between hospitalisations and cases. In the recent surge in UK infections, 98% of new cases have been identified as the Delta variant, yet hospitalisations and deaths remain comparatively low compared to previous waves.

Whilst volatility is likely to continue amid current market uncertainty over the coronavirus pandemic, our message to all investors remains the same – stay calm in making decisions that are aligned with your long-term goals, not current market conditions. In any market environment, we strongly believe in the importance of having a portfolio that contains a variety of asset classes, including stocks and bonds, balanced in a way that reflects the investors risk tolerance and investment timeline.

As always, we appreciate your support and value your trust in LNKD Investment Managers..

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell or an indication of trading intent on behalf of any LNKD product. LNKD Investment Managers is an authorised financial services provider (FSP 51257).