A bas­ket of wor­ries

SA seems set to once again miss out on the good times, only to take the full hit of the bad times

Financial Mail - - BETWEEN THE CHAINS - Tim Co­hen co­[email protected]­nesslive.co.za

It’s been a rot­ten year on global stock mar­kets, and with­out Fa­ther Christ­mas leav­ing a present un­der the tree, they seem likely to end down for the year. That would be a par­tic­u­larly bad re­sult for SA, which has seen this movie for five years now, and 2018 was a par­tic­u­lar shocker.

The JSE all share in­dex is head­ing for a 15% de­cline for the year, and it’s hard to be­lieve, in the con­text of re­spectable global eco­nomic growth, that this re­sult is ac­tu­ally around the mid­dle of the range glob­ally.

Year to date, mar­kets all over Europe, in­clud­ing Ger­many, Italy and France, have de­clined by that de­gree, while the out­liers were the Chi­nese in­dices in Hong Kong and Shang­hai — both got thumped by more than 20%.

The broad­est mar­ket in­di­ca­tor in the US, the Rus­sell 2000 in­dex, is down much more than the S&P and the Dow, sug­gest­ing that smaller, more Us-fo­cused com­pa­nies are on the back foot.

The broad­est rea­son has been sen­ti­ment con­cerns, but this pic­ture is punc­tu­ated by a whole bas­ket of wor­ries about spe­cific is­sues.

These in­clude US Pres­i­dent Don­ald Trump’s trade war with China and the like­li­hood of in­creas­ing in­ter­est rates in the US, which wor­ries eq­uity in­vestors about the im­pact on the econ­omy. It also tends to in­crease the move to­wards bonds, and ac­cel­er­ates the move away from emerg­ing mar­kets.

The shock­ers just kept com­ing this year, in­clud­ing the Brexit mess, the ar­rest of Nis­san chair Car­los Ghosn and Gold­man Sachs get­ting caught up in a huge Malaysian cor­rup­tion scan­dal, to name a few. Most re­cently, it was re­ported that John­son & John­son knew for years that its baby pow­ders some­times con­tained as­bestos.

Ris­ing in­ter­est rates are sup­posed to help banks, but in­stead, in many coun­tries, they are hurt­ing. The fear of a global slow­down is prov­ing more pow­er­ful than the no­tional ben­e­fits of lower com­mod­ity prices.

The stand-out mar­kets over the year have been the Brazil­ian Bovespa and the In­dian Sensex. Here, the prom­ise of the new dawn failed to ma­te­ri­alise, and SA seems set to once again miss out on the good times, only to take the full hit of the bad times.


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