​​Market performance up to August 2020​​​

​​​The impact of the Covid-19 pandemic on economies around the world remains intensely negative. This is evident in South Africa's recently announced economic growth data.

South Africa's second quarter's quarter-on-quarter economic growth rate shows a deep red at -51%. This massive decline means that from the end of March this year to the end of June, the gross domestic product, the standard measure of the total value of goods and services in the economy, shrank by more than half. This negative growth is p​roof of the tremendous impact that Covid-19 restrictions have had on South Africa. It is important to acknowledge that South Africa's economic woes were evident well before Covid-19 and that the country has been in a technical recession since last year.    

The highest impact is evident in the construction sector, which showed a  decline of 77%. Manufacturing was down by 75%, mining down by 73%, while trade, transport and accommodation sectors showed a drop of about 68%. On the positive side, agriculture showed a growth of 15% on the back of better climate conditions in South Africa.

If we look at how markets performed this year up to the end of August, the picture remains bleak. I will indicate the growth on all major asset classes and compare it with inflation in Namibia, which is currently officially at 2.4% and 3.2% in South Africa. We indicate inflation specifically because only growth above inflation is actual growth or real growth.

Let's kick off with money market investments or cash:

  • Money market investments - these are investments that generate interest up to a maximum term of 12 months. Rates continue to trend lower with the expectation of another interest rate cut locally. Twelve-month fixed-term rates are around 4% after tax and select money market products offer growth of approximately 4.5%, which is at least a positive real return.         
  • Bonds usually do well when interest rates decline. However, bonds were only just favourable for the year so far.  For the past 12 months up to the end of August, returns have been at around 4%.
  • Listed property was again hit hard in August, declining by almost 9% for the month alone. So far this year, the asset class has yielded 45% negative growth and now, for the first time, you have to go back ten years to see positive growth year-on-year. Local equities were also down 0.7% in August and 6.3% for 2020 so far.        ​
  • In Namibia Dollar terms, foreign equities were the best performing asset class for August with a growth of around 5%. Since the beginning of the year, the asset class yielded a staggering 26%. However, most of this was due to the weakening rand rather than growth in international markets. The Namibia Dollar has already weakened by 17% against the US Dollar, 18% against the Pound and over 22% against the Euro so far.

Internationally, measured in their currencies, China is, ironically, pulling ahead until the end of August with a growth of 19.3% so far this year. The American S&P500 grew by almost 10%, while the Dax in Germany, the FTSI in Britain, and the Euro Stoxx, yielded negative growth for 2020. 

Commodities in US Dollar terms are a world of extremes with gold on the positive side up by 27%, while oil is down by 55%.

This scenario is briefly the picture of performance so far this year.

If you want to know more about investing in these challenging times, you are welcome to contact us in Windhoek at +264 61 2991950.