OUTvest Market Commentary - August 2021

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13 September 2021

South Africa Markets

South Africa seems to be struggling to pass the 3rd wave in COVID-19 infections, with new daily cases averaging above 10 000 at the end of August and positivity rate above 20%.[i]

Vaccination hesitancy by citizens may be a contributing factor to the high levels of infections. A South African scientist has discovered a new coronavirus variant with multiple mutations, but it has not been established if the variant is more contagious or can overcome immunity provided by vaccines or prior infections.

The variant is known as C.1.2 it was first flagged by scientists late in August, and has already been detected in all 9 provinces in South Africa and in countries such as China, United Kingdom and New Zealand.[ii]

The South African unemployment crisis hit a record high in the second quarter of 2021, the official unemployment rate in South Africa is 34.4% and expanded definition rate is at 44.4%, meaning that more than 7.8 million people in the country are without a job. The rise in unemployment as a result of the July riots is still not in the data, meaning the unemployment number could still get worse. If the unemployment situation is not dealt with urgency, the riots experienced in July could become the norm[iii] which is extremely concerning.   

Statistics South Africa has published an updated gross domestic product (GDP) estimate, following a comprehensive rebasing of the data. The revised GDP at current prices shows that the South African economy is 11% larger in 2020 than previous estimated, the 7% contraction experienced in 2020 was also revised to 6.4%. The revised number will improve the worrying public debt to GDP ratio to around about 71%.[iv]

In mid-August Africa’s largest stock exchange the JSE had to shut down for 5 and half hours due to record breaking volumes. The chaos was caused by share swap by the two Tech giants Naspers and Prosus. Normally the JSE trades between R20 and R30 billion in volume per day, on the 18th of August R145 billion exchanged hands. The shutdown of the market feeds to the narrative that Naspers and Prosus are too big for Africa’s oldest and biggest stock exchange.

July’s strong performance could not be repeated in August, the South African equity market pulled back by 1.78% in August[v]. In a turn of events the resources sector back-tracked its strong performance experienced throughout the past year, the mining sector contracted by more than 5% while South African REITS were up more than 8% for the month.[vi]

South African debt is starting to look attractive to foreigners, foreigners were net buyers of South African debt in the last week of August. South African debt is viewed less risky due to revised GDP number which means that the debt to GDP is actually lower than previously estimated and we have a large and liquid bond market with attractive yields.[vii]

South Africa fixed income benefited from the Fed’s dovish comments, which halted rising US yields which slowed down estimates of rising inflation.

South African Sovereign bonds rose 1.7% while inflation linked bonds gained 1.2% for the month of August.


U.S Markets

The US economy seems to being pumping in all cylinders as the world’s biggest economy added 943 000 jobs in July[viii]. Prices in the US rose 5.4% in July in line with June’s figures and the largest jump since August 2008.[ix] US inflation seems volatile at the moment and it is difficult to ascertain the trend as a result of this. 

Fed’s chair Jerome Powell still believes that inflation is transitory, and a decision on the Fed’s tapering program is expected in September.

The U.S. Senate stayed in session to pass a bipartisan USD 1 trillion (69-30) infrastructure bill, passing it on to the House, as it also passed a USD 3.5 trillion framework bill along party lines (50-49), permitting them to start the debate.[x]

The rapid spread of the Delta variant raised concerns, herd immunity may not be reached at 70% of the population vaccinated, the new discussed target may be 80%.

US equity markets continued its strong performance into August, the broader S&P 500 gained 3 % in August bringing the total return for year-to-date to 21%.[xi] Financial Companies led the strong rally and the spread between 2 year and 10 year U.S. Yields, which impact banks’ profitability, widen to roughly 1.1% supporting a growth in their profitability, all other things equal.

The investment side of companies such as Goldman Sachs and JP Morgan have done pretty well, this was driven by retail traders entering stock market. All S&P 500 sectors were up in August except for the energy sector.

The US fixed income indices were mostly down in the month of August possibly as a result of the uncertainty over the long-term inflation expectations.


European Markets  

The Delta variant has caused COVID-19 cases to rise rapidly in Europe, due to the high level of vaccinations, deaths and hospitalization are much lower than in previous waves.

Eurozone harmonized index of consumer prices (HICP) jumped from 2.2% in July to 3% in August, this well above the 2.7% consensus based on a Reuter’s survey.[xii]

Germany’s unemployment rate improved to 5.5% in August, Europe’s biggest economy added 53 000 jobs month-on-month in August.

European equities reached all-time highs in August, this is the seventh consecutive month the Euro-350 reached all-time highs. The continental benchmark gained more than 2% in the process. The Dutch equity market punched above its weight, contributing a third to the broader index’s performance. [xiii]

European nominal bonds were sold off in August, this was driven by renewed better than expected growth levels and higher inflation. As expected inflation linked bonds outperformed nominal bonds, both in U.K and in the Eurozone, U.K inflation linked bonds gained 2.7% while the broader European inflation linked index gained .3%.


Emerging Markets

The Chinese Communist Party’s heavy hand continued into August, the latest victim being the gaming shares.The Chinese government plans to tighten already strict rules on the time children spend gaming online.

The Central Bank of Chile (BCCh) raised its policy rate 75 basis points to 1.50%, the largest hike in 20 years and above consensus expectations. While BCCh’s press release does not include forward guidance, references to "gradual normalization” and "the policy rate remaining below neutral” were removed, underscoring its possible intent to frontload the cycle in response to a sharp rise in fiscal stimulus.[xiv]

Emerging Markets recovered in August posting 2.6% gains from 6.4% losses suffered in the previous month. The Thai, Colombian and Philippine’s markets were the star performers, with gains over 10% for the month. The Chinese market was marginally up in August after heavy losses experienced in the previous month.[xv] 


Funds on the OUTvest platform

At OUTvest not only do we aim to help our clients reach their objectives, we also take into account how our investments affect the environment, how they contribute to social change and how leadership conduct themselves.

The CoreShares OUTaggressive Index Fund has 5/5 Morningstar Sustainability Rating and the CoreShares OUTmoderate Index Fund has 4/5 Morningstar Sustainability Rating. The report is conducted on the equity allocations in the funds, and as a result of the low equity allocations (by design) in our other funds, no Morningstar Sustainability Reports are available. The report was conducted as of  end 30th of June 2021.

Due to South African markets performing poorly in August, (our funds) who have a high equity exposure the CoreShares OUTaggressive and CoreShares OUTmoderate Index Fund struggled in the month of August relative to their peers, however both funds were marginal up for the month on an absolute basis with returns of .72% and .76% respectively.

The CoreShares OUTstable and CoreShares OUTcautious Index funds performed satisfactorily in the month of August, both funds managed to outperform 50% and 55% of their peers and gave investors a .91% and 1.06% return respectively.

What’s pleasing is that all the funds in the OUTvest platform were able to outperform more than 50% of their peers, in the 3 year period ending August 2021.


For a more detailed look at the month please see downloadable PDF here.



OUTvest is an authorised FSP. All our investments are exposed to risk, not guaranteed and dependent on the performance of the underlying assets. Past performance is not indicative of future performance. Individual investor performance may differ as a result of fees, the actual investment date, the date of reinvestment and dividend withholding tax. Ts and Cs apply.



[i] https://www.google.com/search?q=covid+new+cases&rlz=1C1GCEU_enZA928ZA928&oq=c&aqs=chrome.0.69i59l2j46i199i291i433i512j69i57j35i39j0i131i433j46i131i433i512j0i131i433i512l2j0i271.3569j0j15&sourceid=chrome&ie=UTF-8

[ii] https://www.aljazeera.com/news/2021/8/30/south-africa-scientists-detect-new-covid-variant

[iii] https://tradingeconomics.com/south-africa/unemployment-rate

[iv] http://www.statssa.gov.za/?p=14614

[v] S&P indices

[vi]  S&P indices

[vii] https://www.bloomberg.com/news/articles/2021-08-31/south-africa-s-rand-gets-up-from-the-canvas-after-rough-august

[viii] https://am.jpmorgan.com/gb/en/asset-management/adv/insights/market-insights/monthly-market-review/

[ix] https://www.cnbc.com/2021/08/11/cpi-report-july-2021.html

[x] U.S. Equities Market Attributes July 2021 - Commentary | S&P Dow Jones Indices (spglobal.com)

[xi] S&P Indices https://ihsmarkit.com/research-analysis/daily-global-market-summary-31-august-2021.html

[xii] S&P indices

[xiv] https://www.lazardassetmanagement.com/au/en_us/research-insights/spotlight/emerging-markets-monitor

[xv] Market Attributes: U.S. Equities August 2021 (spglobal.com)

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