During the month, global financial markets navigated through a complex interplay of economic
indicators, geopolitical tensions and central bank policies. In the US, ongoing concerns
surrounding the Federal Reserve’s monetary policy stance played a pivotal role. Investors closely
monitored signals from the central bank regarding its approach to interest rates and inflation
management amidst mounting pressures. Geopolitical tensions weighed on market sentiment, as
escalating conflicts in certain regions raised concerns about the potential impact on global trade
and economic stability. Additionally, corporate earnings reports for the fourth quarter of 2023
provided mixed signals, with some companies surpassing expectations while others struggled to
maintain growth momentum in the face of supply chain disruptions and increased input costs.
Moreover, developments in the technology sector continued to capture investors’ attention, with
advancements in areas such as artificial intelligence, cybersecurity and semiconductor
manufacturing driving further optimism in this sector.
As result, both the S&P 500 and the Nasdaq 100 performed strongly over the month, increasing by
+5.3% (YTD: +7.1%) and +5.4% (YTD: +7.4%), respectively. In local currency terms, the Euro STOXX
50 also had a strong month ending up +5.0% (YTD: +8.1%), while the UK’s FTSE 100 was little
changed over the month increasing by +0.5% (YTD: -0.8%), reflecting weakness in mining and
energy stocks. In Japan, equities were boosted by the Bank of Japan Governor, Kazuo Ueda,
expressing confidence that moderate inflation was likely to continue as wages grow. Furthermore,
Japan’s return to steady growth and corporate profitability also underpinned confidence. As a
result, the Nikkei 225 ended the month up a stellar +8.0% (YTD: +17.1%).
On the domestic front, the FTSE JSE All Share underperformed its global counterparts decreasing
by -2.4% (YTD: -5.3%). The performance was predominantly impacted by the selloff in the resources
sector which declined by -7.2% (YTD: -12.6%) as a result of the poor performance from index
heavyweights, Anglo American PLC and Gold Fields, which declined by -7.1% and -9.4% respectively,
for the month.
From an economic perspective, great focus was placed on South Africa’s National Treasury Budget
projections. Contrary to some expectations of new populist policies or expansive spending
initiatives on the eve of elections, the 2024 budget distinctly opted for a more prudent path. The
strategy employed by the National Treasury seeks to navigate a fine line, aiming for fiscal
discipline and consolidation in an environment marked by diminishing revenues and a notably
sluggish domestic economy.
The essence of the situation, is that South Africa’s economy is in dire need of substantial
investment to foster economic growth and generate sustainable employment opportunities.
Although the 2024 Budget underscores a commitment to macroeconomic stability, the
implementation of structural reforms and the enhancement of state capacity, it acknowledges that
the journey to rectify the adverse effects of operational deficiencies, maintenance oversights and
governance shortcomings, especially in key state-owned enterprises like Eskom and Transnet, will
be a gradual process. This is in addition to confronting the legacy of decades of policy inaction and
the repercussions of extensive state capture. The journey ahead promises to be a formidable one,
requiring steadfast commitment and strategic foresight to navigate the complexities of economic
rejuvenation and governance reform.
Article “Decoding the month – February 2024” by Corion Capital.