May 2023 Update
F&A Monthly Update | MAY 2023
Time for another monthly update! As always, we've put together a snapshot of market insights from PortfolioMetrix to bring you an overview of where your investments are headed. Here's your May 2023 update!
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Richard and the F&A team
May 2023 Update
This month's piece is compiled by Brendan de Jongh, SA Head of Research - PortfolioMetrix.
GLOBAL UPDATE
The US debt ceiling impasse garnered most of the market’s attention in May, an impasse that was positively resolved late in the month. Elsewhere, and as expected, the Bank of England and the ECB both raised interest rates by 25 basis points to continue to put downward pressure on inflation. Unfortunately, the data continue to show that inflation remains stubbornly high in both the UK and EU and indeed most developed economies. The divergence noted in previous months between the strength in services sectors and weakness in manufacturing sectors continued to widen. Markets were more mixed over the month, with several developed equity markets (with the notable exception of Japan and a lesser extent the US) falling in local currency terms whilst bonds also fell.
LOCAL UPDATE
Sentiment towards SA investments soured as the economic outlook deteriorated due to protracted power outages and the perception of political alignment with Russia. This caused severe weakness in the ZAR year to date compared to both developed market and emerging market currency peers. Local bonds suffered in sympathy to the rand with longer-dated bond yields reaching their highest levels this millennium. South African equities, and particularly those stocks exposed to the SA economy, were hard hit in the month as the news flow turned from bad to worse and trading updates confirmed what was feared. The losses in the rand flattered returns for offshore asset classes with global equities performing the best as index returns in hard currency were driven up by mega cap companies.