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Global inflation concerns remained front of mind during May as the bullish outlook for developed economies continues into the second half of this year. This view is underpinned by vaccine roll-outs continuing apace across multiple regions.
Inflation as a risk is best highlighted in the Bank of America’s (BofA) recent Global Fund Manager Survey, whereby BofA regularly asks fund managers what they perceive to be the greatest current “tail risks.” For most of last year, COVID-19 was the biggest concern amongst investors. Now however, the biggest tail risk is that the Fed moves too late and fails to stop inflation from taking hold as highlighted in the recent survey below:
The debate about whether the current higher inflation trend is due to short term supply constraints, and whether this mismatch is transitory or whether there is something more fundamental and long-lasting happening continues amongst investors, with the Fed adamant that rising prices in the U.S. will not last and don’t require any course correction yet.
In South Africa, the rand continues to strengthen and leads other emerging markets as the strongest currency against the U.S. Dollar year-to-date. The rand’s strength can be attributed to an accommodative Reserve Bank, the super cycle in industrial metals which has indirectly benefited SA’s current account; and general optimism about emerging markets.
The current market environment is likely to see a greater dispersion in returns across markets and asset classes, requiring investors to focus on fundamentals. We remain constructive towards risk assets like equities and encourage investors to remain measured when making investment decisions.
|SA MARKETS||LAST PRICE||MAY 2021 MOVES||YTD MOVE|
|JSE ALL-SHARE||67 964||1,53%||14,40%|
|RESOURCE 10||67 666||-1,39%||17,53%|
|INDUSTRIAL 25||86 872||0,89%||11,52%|
|FINANCIAL 15||13 456||9,04%||11,57%|
|SA LISTED PROPERTY||305||-3,13%||11,91%|
|GLOBAL MARKETS||LAST PRICE||MAY 2021 MOVES||YTD MOVE|
|DOW JONES||34 529||1,43%||12,82%|
|S&P 500||4 208||0,67%||12,04%|
|EURO STOXX 50||4 039||0,65%||13,70%|
|FTSE 100||7 023||1,21%||8,70%|
|NIKKEI 225||28 860||-0,55%||5,16%|
|CURRENCIES||LAST PRICE||MAY 2021 MOVES||YTD MOVE|
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