OUTvest Market Commentary - January 2022
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23 February 2022
OUTvest Market Commentary - January

South African Markets 

South Africa will no longer require people who test positive for COVID-19 – but don’t have symptoms – to isolate and has also reduced the isolation period for those with symptoms by three days, the government has said, as the country exits its fourth wave of the coronavirus. This shows COVID-19 is heading to an endemic status. Even though more transmissible variants are forecasted by scientists, they are expected to have less impact on the economy.i

The South African Reserve Bank increased the Repo rate to 4%, this was widely expected by market participants, as the lender of last resort attempts to contain inflation and keep up with global economic trends.  The Bank’s head – Mr Lesetja Kganyago, noted that inflation is expected to be 4.8% this year and 4.5% the following year.  The SARB is expected to raise rates by 75 basis points more this year, this will come in 25 basis intervals in each quarter of 2022.

Inflation edged higher in December to the highest level in nearly 5 years, this was mainly driven by the fuel prices. The Transport Index rose 16.8% on an annual basis from 15% in the previous month. Transport inflation contributed 2.3% of the 5.9% headline print.ii

The South African Reserve Bank (“SARB”) lowered its growth projection for South Africa, the SARB cited the July unrest and unfavorable trading conditions mainly in the 3rd quarter for the revised number. The SARB expects the South African economy to grow by 4.8% in 2021 from 5.3% previously forecasted. Growth is expected to slow down to 1.7% in 2022, this is due commodity prices coming down from elevated levels and a fading rebound from the pandemic.

The local bourse had a roller coaster January, the JSE All Share Index reached 76000 points in Mid-January and went down to 72000 the following week and closed at 75000 for the month .  The Iron ore and Palladium prices surged 12% and 28% respectively, this filtered through the Resources Sector which posted more than 5% gains for the month of January.

The surge in energy prices – most notable Coal and Brent Crude prices – lifted environmental-unfriendly Sasol and Thungela which gained 33% and 11% respectively. The big banks also had a good January; Absa, Nedbank and Standard Bank gained 11%, 9% and 7% respectively.

Preference Shares was the best performing asset class on both month-on-month and year-on-year terms, the Pref market gained 5% for the month of January and 52% for the year ending January 31.

Property was the worst performing asset class in January; the listed property market was down more than 3% in January, coming off a very strong performance recorded in 2021.


US Markets 

The US economy grew by 6.9% on an annualized basis in the last quarter of 2021, the world’s largest economy posted 5.7% growth for 2021. This the largest growth number since 1984. This was fueled by fiscal stimulus packages. The US economy grew at a much better-than-expected pace to end 2021 from sizeable boosts in inventories and consumer spending, and despite signs that the acceleration likely tailed off toward the end of the year  .The world’s largest economy also added 6.4 million jobs in the same year. 

The Federal Reserve is expected to increase interest rates by end March, this after US inflation hit a multi decade high. The fed chair – Jerome Powell stated asset purchases are more likely to end in March and a process to reduce bond holdings on the FED’s balance sheet has already started.

As the US-Russia tensions escalate over Russia’s possible invasion of Ukraine, this has sent Brent Crude prices on a surge. A full conflict will possibly lead western nations to impose sanctions on Moscow, which will further tighten oil supply as Russia is a major oil producer. As Russia builds a military base on the border of Ukraine, Washington has also deployed troops in Eastern Europe to counter a possible attack from Moscow. The Pentagon is expected to deploy more troops in the coming days.

US equities market suffered the worst start to the year since the 2008 financial crisis, as the threat of rising interest rates, disappointing corporate earnings and geopolitical tensions sent US Stocks nose-diving in January. The broader blue chip index, the S&P500 fell 5.35% in January. The tech heavy Nasdaq narrowly missed recording its worst January as the index lost nearly 9% for the year-to-date.

The recent hawkish shift from the Fed, increases the duration risk from US government bonds and could be supportive for the US dollar in the near-term, due to the rising yield differential with other major developed market currencies that have a less hawkish policy bias.


European Markets 

The Eurozone economy slowed down sharply in the final quarter of 2021, as the wave of COVID-19 Omicron infection, supply chain bottlenecks and rising energy prices squeezed the consumer. Gross domestic product grew 0.3% in the 19-member states in the last quarter of 2021. Europe’s biggest economy, Germany, only managed a modest 0.7% growth in the last 3 months of 2021 compared to 1.4% a year ago. As a manufacturing heavyweight Germany was hard hit by supply chain bottlenecks and shortage in raw materials.   

Inflation in the Eurozone hit record levels in January. The Eurozone print came at 5.1%, these are highest levels since records began in 1997. This was fuelled by rising fuel prices; energy prices has gained more than 28% in the past year. The latest inflation print puts pressure on Christine Largarde’s European Central Bank (ECB). Even though at the December meeting, the ECB signalled that rates are unlikely to rise in 2022, it remains flexible in its future policy. The ECB is expected to announce a strong stance on inflation in their next meeting, as inflation is way above the ECB’s target of 2%. The market expects at least two rate hikes for 2022.iv 

The UK economy slowed down due to the spread of the Omicron variant. Retail sales fell by 3.7% in December, PMI (manufacturing Index) was lower at 53.6 from 58.5 the previous month. Unemployment fell to 4.2%. Inflation spiked to 5.4%, the market expects the Bank of England to raise rates 5 times in 2022.

European equities followed the global trend, most European Indices were down for the month. The European broader index was down by 5%. Information Technology led the turmoil as the sector was down more than 12% for the month.


Emerging Markets 

The Chinese economy slowed down due to resurging COVID-19 case numbers and stricter lockdown measures, real GDP came in at 4% year-on-year. Fixed income investment was down by 4.9%, while retail sales grew by a modest 1.7%. The People’s Bank of China (PBoC) continue to go against the global trend when it comes to monetary policy, the PBoC announced several benchmark rates cuts.

 The Central Bank of the Republic of Turkey (CBRT) maintained its policy rate at 14%, but turned more dovish in its forward guidance despite surging inflation. After cutting rates by 500 bps since September, which pushed the lira to an all-time low, the CBRT paused in its first meeting since inflation reached a record high of 36% earlier this month. In a bizarre turn of events, Turkish president Recep Tayyip Erdogan fired the county’s Chief Statistician after inflation reached record highs. 

Inflation slowed slightly in Brazil in December, but less so than expected despite aggressive tightening by the central bank. Banco Central do Brasil has been the most hawkish central bank in the world, minutes from the Bank’s December meeting suggest that the Central bank is expected to raise rates again by 50 basis points in February.

Even though emerging markets equities were negative in January, they outperformed their developed markets counterparts. The Brazilian and Chilean equity markets started 2022 with a bang, the Latin America markets gained 11% and 12% respectively. Due to geopolitical tension the Russian stocks tumbled by more than 8% in the same month.


Funds on the OUTvest Platform 

Due to the sell-off in global markets and the strengthening of the local currency, funds on the OUTvest platform had a tough start to 2022. The more offshore focused funds, the Coreshares OUTaggressive Index Fund and Coreshares Total World Stock ETF(Exchange Traded Fund) lost 2.46% and 7.58% respectively in January.

The Coreshares OUTmoderate, Coreshares OUTstable and Coreshares OUTcautious Index Funds also had tough start in 2022, all posted losses in January.  However all but 2 of the Funds managed to outperform their peer group during January, with the Coreshares OUTstable Index Fund outperforming 71% of its peers in the same ASISA category.

The poor performance in January – one month only – should be taken in context, as we all know markets do not go up in a straight line and stomaching volatility is a part of the game. What is encouraging is that all the funds in the OUTvest platform are meeting their inflation target of 3 years ending January 31st.

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] Covid

[ii] Inflation

[iii]end-of-year gain

[iv] https://www.ft.com/content/304c8a23-aa5d-44a3-8903-bfd6f1e2b12a

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


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