tion of monthly US government bonds purchases every quarter. Given that it is coming off an $85bn monthly programme, it’s going to take at least two years to run the programme down. The Japanese central bank continues to print money at a dizzying rate as it attempts to lift the economy out of its three decades of slumber and the European Central Bank is happy to do “whatever it takes”, to quote its president Mario Draghi. All of this suggests that the band will keep playing for the next year at least. EQUITY MARKET PERFORMANCE In the past year we’ve seen global equity markets dance hard in response to the music from the various central banks (see graph – all returns in rand). Even the JSE has been up by 20% over the one- year period to the middle of February, outperforming other emerging markets in the process. WILL THIS CONTINUE INTO 2014? It is likely that global equity markets will continue to be supported by the anticipated continued liquidity injections. The US growth recovery is slow but seems to be entrenched. Europe still has a long way to go – but it seems to have turned the corner. There are some key threats to Chinese growth remaining on track. The property and shadow banking bubbles are the most serious of these – but the central government should have enough firepower to deal with these. WHAT ABOUT SOUTH AFRICA? Our country is a fascinating mix of good and bad. Despite being one of the ‘fragile five’ with our twin deficits (Government and trade), upcoming general elections in May and our currency having weakened significantly over the last year, the stock market is currently at an all-time high.
The way to reconcile this is that the local market index is dominated by randhedge stocks. The weakness of the rand and the global recovery is very good for these while the local industrials and financials are sold off.
In summary, it seems that the dancing will continue for a little longer here as well – but it seems the music is changing and investors (or their managers) must be able to respond.