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
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.