May 2022 Update
F&A Monthly Update | May 2022
May saw us enjoy a somewhat more normal month in SA. On the positive side, Covid numbers have completely disconnected from an infection/death perspective. Regulations around mask wearing and more desperately need to be dropped. From a markets perspective, with inflation on the move and central banks raising rates, it seems we have entered a more volatile period. This of course does happen from time to time, but never feels great. As before, our portfolios are designed to absorb impact, and while volatility is uncomfortable, it also creates opportunities for our specialists to pick up bargains.
Please see below from Brendan!
May 2022 Update
This month's piece is compiled by Brendan de Jongh, SA Head of Research - PortfolioMetrix.
LOCAL UPDATE
The local equity market ended the month slightly ahead of global equities, but this came at a deeper drawdown during the month. The rand also originally weakened to over R16 to the US dollar but recovered from these levels eventually finishing the month stronger than where it started. South African bonds was the strongest asset class rising 1% in rand terms. Global property fell strongly over the month affected by weakness in hard currency terms as well as a stronger rand. This contrasted with the local property sector that remained flat over the month. The financials sector on the local equity market strongly outperformed the other super sectors with the industrials sector falling most (driven by poor results from Tencent dragging down Naspers/Prosus) followed by resources.
GLOBAL UPDATE
Although the global equity market ended the month relatively flat there was significant intra-month volatility as markets initially fell 6% to mid-May, only to recover this by the end of the month. The key macro risks of war in Ukraine, tightening monetary policy and Covid restrictions in China remain, and markets lacked a clear catalyst for a change in sentiment. In an environment dominated by fears of recession or runaway inflation, heightened volatility has become the norm with severe market reactions playing out at a company level. Central banks are continuing to grapple with inflation. But they are now even more conscious of rising growth risks, which remain higher in Europe than the US. Labour markets remain tight but with real wage growth negative the squeeze on consumers remains. The slight uptick in global equity markets was accompanied by positive global bond returns, however commodities remained the strongest asset class.
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