OUTvest Market Commentary - December 2021

Back to Money advice
26 February 2022
OUTvest Market Commentary - December

South African Markets

The Omicron COVID-19 variant turned out to be less deadly than previously expected, a study done by South African scientists found that, you are 80% less likely to be admitted to hospital compared to the Delta variant[i].   This led South African President Cyril Ramaphosa to not tighten COVID-19 restrictions – as has been done in previous waves and this was widely welcomed in the hospitality sector which was hard hit by the pandemic.

On a positive note, Fitch Ratings revised South Africa’s long term foreign currency dominated debt outlook from negative to stable. The agency stated that GDP will reach pre-pandemic levels during 2022, despite the 1.5% quarter on quarter  contraction in the 3rd quarter of 2021, which was triggered by the July riots and stringent COVID-19 restrictions. The rating agency expects South Africa’s GDP to expand by 4.7% in 2021. Despite the upgrade the number is below the 5.1% expected forecasted by the South African Reserve Bank.  The revised rating noted better than expected GDP print and improved fiscal indicators for the revised outlook[ii].

South African manufacturing activity expanded at a slower rate in December as new sales orders and employment edged lower, this is according to a survey conducted by ABSA. The seasonally-adjusted ABSA Purchasing Managers' Index (PMI) fell to 54.1 points in December from 57.2 points in November, remaining above the 50-point mark that separates expansion from contraction.

Inflation edged higher in November to 5.5% from 5% the previous month. A major contribution to the higher inflation print is the surge in fuel prices and transport costs. The market consensus is that the South Africa Reserve Bank will hike rates each quarter of 2022 and 2023 respectively.

2021 was a year to remember for South African equity investors, the JSE All Share index gained nearly 30% for the year and 15% for the last quarter, and this was the best equity returns in 12 years. The commodity boom filtered through into our market, the Resources sector rose more than 20% in 2021. With Royal Bafokeng Platinum being the stand-out performer, gaining 120% for the year, this comes after a bidding war for a controlling stake.  


US Markets

U.S COVID-19 cases have hit their highest level of the pandemic as two highly infectious variants circulate throughout the country and health officials urge Americans to get vaccinated and boosted against the virus. Even though 62% of the US adult population is vaccinated, the country was still experiencing over 1500 deaths a day on average.[iii]

US congress passed the 1 trillion dollar infrastructure bill, the package will put 550 billion dollars into transportation, broadband and utilities. The legislation will put $110 billion into roads, bridges and other major projects. It will invest $66 billion in freight and passenger rail, including potential upgrades to Amtrak (The US National Railroad Passenger Corporation). It will direct $39 billion into public transit systems. This is Presidents Biden’s latest effort to create jobs and reboot the economy.

The US inflation print in December came at 7%, this the highest number in nearly 40 years. Inflation spiked in 2021 due to pandemic-induced supply constraints, soaring energy costs, shelter, labour shortages, increasing demand and a low base effect from 2020. Inflationary pressures are likely to last well into the middle of 2022 and Chair of the Federal Reserve, Jerome Powell, recently pledged to do what’s necessary to contain an inflation surge including increasing interest rates. The market is pricing in four rate hikes for 2022.

2021 was another exceptional year for US equities, the S&P 500 had its best year since 2008, and the US equity benchmark gained nearly 27% for 2021. The US market was supported by loose monetary policy and accommodative fiscal policy.


European Markets

Several European countries have reported record high COVID-19 cases, as the Omicron variant continues to surge across the continent. This has led nations such as Germany and Portugal to introduce additional restrictions once again.

Inflation in the United Kingdom accelerated to 5.1% in November, the highest level in 10 years.A rise in wholesale gas prices is still a big factor driving inflation, and that is continuing to push up domestic energy bills. In an attempt to curb inflation, the Bank of England surprisingly raised interest rates for the first time in 3 years.

The UK economy lagged its developed market counterparts in economic recovery, the world’s 5th largest economy by GDP grew by 1.1% in the 3rd quarter of 2021. This was below the 1.3% the market has estimated and the 5.4% growth in the previous quarter.

European equities followed the global trend, the Pan-European Index, the Euro Stoxx rose by 22% in 2021, this is the second-best performance since 2009. The Banks and tech shares fuelled the rally, both gaining 34%.

The German DAX and UK FTSE both posted 15% gains in 2021, while France’s CAC was up a stellar 30%.

On the contrary, it was a year to forget for European Fixed Income investors, most major European Fixed income indices were down in 2021.


Emerging Markets

The Chinese Central Bankers seem to be going against the global trend regarding monetary policy, slower economic growth and slowdown in the property market, which led the People Bank of China to cut the Reserve Requirement Ratio (RRR) and reduce slightly the loan prime rate – the rate at which companies and households can borrow.

Turkey’s inflation rate rose to 36.1% in December, up from 23.1% in November. The latest print is the highest since 2002. In the midst of an inflation crisis, Turkish Central Bankers continued with their unorthodox monetary policy by cutting rates by 100 basis points (bps). This is seen as central bankers bowing to pressure from the authorities.

At Alejandro Diaz de Leon’s final meeting as governor, the Bank of Mexico (Banxico) exceeded market expectations and raised its policy rate by 50 bps to 5.5%. Banxico began its tightening cycle in June with steady increases of 25 bps per meeting, but after four such hikes decided to accelerate the pace of increases as headline inflation is at a two-decade high of 7.37% and the board is concerned about losing control of inflation expectations, as well as tighter global financial conditions.

Chinese equity markets lagged global markets in 2021, Chinese equities fell by close to 20% in 2021. This can be attributed to the heavy hand we saw from the authorities and woes in the property market.

China’s equity performance filtered through to the overall emerging markets index, as Emerging Markets BMI fell by 1.2% in 2021.


Funds on the OUTvest Platform

Funds on the OUTvest platform performed extremely well both in absolute terms and relative to the peers throughout 202

Over the year to the end of 2021 four of our five funds managed to beat 50% of the peers in the same ASISA category, the Coreshares OUTmoderate Index Fund was the star performer in the last quarter of 2021, it managed to outperform 99% over the last quarter and 96% for year  end of 2021.

The strong performance in Global and Local equity markets filtered through into our funds, all our equity and multi-asset funds managed to gain double digit growth, with the Coreshares OUTaggressive Index Fund and Coreshares OUTmoderate Index Fund gaining 32% and 28% respectively for the year.

Some encouraging news due to the consistent performance of our funds: Morningstar upgraded three of our funds from 3-star to a 4-star; this means all our Morningstar rated funds are 4-star rated.

Morningstar NAV to NAV, net distributions reinvested. Peer group comparisons are performed using the oldest share class for each fund in the peer group. Past performance is not illustrative of future returns and cannot be guaranteed.

Annualised return is calculated as the geometric mean return over periods longer than 1 year.

Source: S&P Dow Jones Indices. This performance does not take into account fees, including transaction or management fees.


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


OUTvest is an authorised FSP. All 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. Both Exchange Traded Fund(s) (ETF) and unit trusts are collective investment schemes, however, these products are priced and traded differently. A unit trust is priced once a day whereas an ETF is trading continuously throughout the day during JSE trading hours. Benchmark: FTSE Global All Cap Index. Collective investment schemes are generally medium to long-term investments. Ts and Cs apply.



[i] https://www.aljazeera.com/news/2021/12/22/covid-south-african-study-suggests-omicron-milder-than-delta

[ii] https://www.fitchratings.com/research/sovereigns/fitch-revises-south-africa-outlook-to-stable-affirms-at-bb-15-12-2021

[iii] https://www.cnbc.com/2021/12/29/us-covid-cases-rise-to-pandemic-high-as-delta-and-omicron-circulate.html

Latest Money advice articles
Become an Investor in 4 Easy Steps
OUTvest Market Commentary - June 2022
OUTvest Market Commentary - May 2022