The Markets Daily

US inflation has struck fear into the hearts of market participants. So dreaded is the concept of accelerated price growth that it wields the same power as Lord Voldemort.

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The world seems rather black and white for the moment, limiting the scope for existential thinking. Markets are governed by a long series of if statements, providing investors with barely any resolve. South Africa’s prospects are conditional. We need only confer with the ratings agencies to understand the path that lies ahead.

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We have in process, the makings of a perfect storm for equity stocks. The technology sector was one of the few sectors which benefitted greatly from the move to work-from-home and a surge in demand for online purchases in the wake of the pandemic in 2020.

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I will confess, when I saw SA’s daily case count breach the 2,000 level last week, I was waiting for an exponential increase to follow and that we were now facing the third wave of covid-19. To be honest we are probably seeing the start of the third wave, but if we are lucky, perhaps we can avoid exponential growth in new cases and keep the peak well below the one we saw in January.

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It appears that the Jedi force conjured on the fourth of May has inspired greatness in financial markets this week, dispelling Sith-like notions of inflation. Most global counters are flashing green as iron ore breaks US$200/tonne and the Dow flirts with another record high, fuelling Fed fears of overstretched valuations which could compromise the US financial system if risk appetite fades

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Oh what a night! News emerged yesterday afternoon and into the evening that the ANC’s Secretary General, Ace Magashule, had been served a letter informing him of his suspension from the ANC on Monday, after not stepping aside as per an NEC decision in early April. But Ace is not giving up so easily, and apart from suggesting that the decision and delivery of the decision was unconstitutional and that he would be appealing the outcome, also took it upon himself to suspend ANC President (also SA’s President), Cyril Ramaphosa from the party (although given that this decision has not been taken by the NEC and NWC and thus is unlikely to stand). The NEC has taken note of Ace Magashule’s response and will be meeting over the weekend to discuss its next move.

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Globally, news headlines were dominated by US Treasury Secretary Janet Yellen’s comments that rates may need to rise to stop the economy from overheating, deepening the sell-off in tech stocks. Global equity stocks closed in the red, with the Nasdaq down almost 2% and the MSCI for EM stocks shedding 0.3%, with the local bourse closing 0.6% weaker.

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I am sure I have said this before, but I feel today it is particularly relevevant – the more things change, the more they stay the same. There are numerous changes facing the global economy this year – the existence of vaccines for covid-19 and the implementation of their rollout at varying paces across the world, expected economic recovery globally and the announcement of power couple Bill and Melinda Gates’ divorce after 27 years of marriage.

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We’re on the starting blocks of another five-day week – an almost foreign concept to South Africans after a month of intermittent public holidays. What could possibly go wrong, she says nervously.

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The weather and an apparent shortage of caffeine have made me rather stoic this morning. Perusing the early morning data releases and the reactions they have elicited, I’m reminded of the words of the Greek philosopher Epictetus...

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