Equity markets’ decline continued during October. Strong economic data from the US, which showed an above-trend economic growth rate of 1.2% in the third quarter, driven by a resilient US consumer, raised concerns about higher inflation and interest rates staying higher for longer. On the opposite end of the Pacific Ocean, China recorded no growth in consumer prices in September, indicating persistent deflationary pressures and reduced demand in the world’s second-largest economy. Geopolitical risk in the Middle East escalated, after a series of attacks in Israel & Gaza, raising investor uncertainty even further.
Against this backdrop, local cash and bonds were the best performing asset classes for South African investors during October. The local equity market has now declined by more than 10% since end of July, as local resource companies struggles under a weak Chinese economy and local consumer and financial companies faces an uphill battle in the local economy.
Surprisingly, the exchange rate to the US Dollar appreciated from 18.93 to 18.65 over the month. Oil prices declined by some 8% during the month, which coupled with a stronger rand, could lead to some inflation relief next month. Read more.