Markets are in a holding pattern

We are in June and equity markets worldwide seem to be in a holding pattern. The JSE All Share index is -4% for the year to date, compared to the S&P500, Europe and China all at -12%. The worst performing large-cap share in SA is Prosus at -41% and the best is Sasol at +64%.  If you buy the SA 10-year bond you will earn a yield of 9.86% while in the USA you will only get 2.91%. The rand is only 3% stronger against the dollar but much stronger against the pound and euro so far this year.

It seems that there is no new shocking news to move the markets in either direction. The talk about inflation; Chinese lockdowns; and war in Ukraine are all included in the price already and we shall have to wait for something unexpected to get things moving again. The one negative overhang is a potential slowdown of world economies into recession territory. This will be negative for shares and commodities but potentially good for bonds.

Behind the scenes the world is still moving towards a more environmentally friendly scenario. Over the shorter term oil, gas and coal will still play a big part in our lives but things like electric vehicles are making some big inroads, especially in the developed world (see graph). One thing is certain and that is that Covid is not top of mind any longer. The media tried to make Monkeypox into a second act, but so far that is not taking off. So for now we have to wait for the next company reporting period later in the year to see if our portfolio returns can make a comeback into positive territory.

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