from the editor
Mario Draghi, president of the European Central Bank (ECB), has some sobering thoughts for those who are caught up in the Donald Trump-inspired market rally. Buoyed by promises of tax cuts and massive infrastructure spending, which is supposed to turn the US into the major driver of global growth, markets took all of a day to recover from Trump’s unexpected victory in the US presidential elections in November.
Not so fast, warned Draghi at an ECB press conference on 8 December: “It’s very difficult to assess what are the effects of these big changes, like the radically new administration – new in the way it looks at the world – in the US, or for that matter even Brexit, or for that matter even the outcome of the Italian referendum a few days ago. All three events were expected to have major effects in the world, and in all three cases, the markets, the financial intermediaries, proved much more resilient than people had expected them to be.”
That may be so, but there will be medium- to long-term consequences of these decisions, Draghi said, warning that they are “very, very difficult to assess now”.
The markets could be pricing in too much good news, John Briggs, head of strategy for the Americas at NatWest Markets, told the Financial Times. “We think the market is not paying enough attention to the strength of the dollar and there is a chance that this weighs on the economy in the near term.”
In SA, growth is expected to remain weak, with little room for monetary or fiscal stimulation. (For a more optimistic take on the year ahead, read the flip side of this magazine.)
With crucial elections coming up in Germany, France and the Netherlands in 2017, more shocks are likely to head our way. To what extent will cheap cash, provided by monetary stimulus from banks like the ECB, be able to continue propping up the markets?
Matter of fact
In the article Turning the Eastern Cape around, published in the 1 December edition, we said the N2 Wild Coast toll road could create 540 000 jobs over a 30-year period for business and families along the route. In fact, a study by Sanral showed it could create up to 54 700 jobs.
In the 15 December issue’s Fund in Focus, Denker Capital said the SIM Global Equity Income Feeder Fund held a 3.42% stake in GlaxoSmithKline Consumer Nigeria. In fact, the stake is held in GlaxoSmithKline. We regret the errors.