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MONTHLY UPDATE

September 2021

 

Expectations for tighter monetary policies are intensifying globally. Rising inflation, supply-chain bottlenecks and declining levels of stimulus are driving analysts to downgrade economic outlooks as world economic activity begins to show signs of cooling. On a corporate level, earnings momentum has peaked, with the MSCI All-Country World Index’s forward earnings per share rising 20%, compared with 60% in June. Market volatility, slowing economic and earnings growth, and a reduction in stimulus all point to a more cautious global sentiment over the coming months.

Growth in the U.S., although slowing, is still well above average with new jobs and future wage increases likely to further expand the country’s economy over the coming quarters. Inflation and rising rates continued to be the centre topic for the month. The Federal Reserve (the Fed) announced that it would begin to taper the pace of its asset purchases soon (most likely in November), with purchases as a whole set to end by around the middle of 2022. Another key piece of information released by the Fed was its projections for future interest rates over the next few years. U.S. rates are expected to increase to 1.75% by the end of 2024. Markets were surprised by the faster pace of rate increases projected by the Fed, sending caution into the markets as Treasury yields rose.

The outlook for the Eurozone economy continues to improve, with business activity across Europe remaining strong. However, inflationary pressures including shortages of staff, raw materials and transport constrained economic activity over the past few weeks. The European Union’s pandemic recovery fund has only recently started distributing stimulus while the Central Bank has maintained its ultra-accommodative monetary policies – which means that the euro area is set to receive more support than other regions in the coming months. The European Central Bank (“ECB”) also recently announced that it is set to trim pandemic bond purchases in the final quarter of 2021, but in contrast to the Fed, was keen to stress that this was not the beginning of a process of tapering purchases down to zero.

China continued to emit negative news over the month of September, as Chinese property developer Evergrande’s debt crisis sparked fears surrounding China’s property market and potential contagion risks. This negative news follows after unexpected regulations hit Chinese private tutoring companies as well as companies in the technology sector earlier in the quarter. All this has effected investors’ outlook towards Chinese equities and the market in general, with some fearing that future regulations may limit companies’ profit potential. China’s central bank has stepped up net cash injections of late to counter contagion risks caused by Evergrande’s woes, while further monetary and fiscal easing is expected in the weeks and months ahead.

In South Africa, low economic growth lingers as much needed structural changes are slow to be implemented and the political landscape shows no signs of easing investors’ fears. The South African Reserve Bank kept its policy rate unchanged at 3.50% in September and highlighted that the pandemic is likely to have lasting effects on investor confidence and job creation. 2022 GDP growth was revised down to 1.7% from 2.3%.

Recent employment statistics were released with Non-agricultural employment in government and large businesses declining by 86 000 in 2Q21 compared to an increase of 1000 jobs in 1Q21 (-0.09% q/q). 

Recognising the above market dynamics, we maintain our stance of a measured approach across all our strategies whilst remaining constructive on risk assets. Please refer the “Monthly Insights” section where we unpack these views in more detail.

Market moves of the month

SA MARKETS LAST PRICE SEP 2021 MOVES YTD MOVE
JSE ALL-SHARE 64 282 -4,67% 8,20%
RESOURCE 10 58 086 -12,48% 0,89%
INDUSTRIAL 25 81 972 -1,79% 5,23%
FINANCIAL 15 14 624 0,78% 21,25%
SA LISTED PROPERTY 327 -2,29% 19,89%

 

GLOBAL MARKETS  LAST PRICE SEP 2021 MOVES YTD MOVE
DOW JONES 34 456 -2,63% 12,58%
S&P 500 4 309 -4,72% 14,72%
NASDAQ 14 296 -6,31% 10,92%
EURO STOXX 50 4 005 -4,57% 12,73%
FTSE 100 6 980 -1,84% 8,04%
NIKKEI 225 27 618 -1,65% 0,63%
SHANGHAI 3 579 1,70% 3,05%

 

CURRENCIES  LAST PRICE AUG 2021 MOVES YTD MOVE
GBPUSD 1,35 -2,39% -1,48%
USDZAR 15,06 3,64% 2,48%
GBPZAR 20,31 1,66% 1,11%
EURZAR 17,45 1,70% -2,78%

Source: Factset

Explore the chartbook for the month of September.

4th Quarter House View (September 2021)

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