Global Economic Update

Economic Overview

Since the start of the year economies around the world have continued to open up post their Covid lockdowns, resulting in strong growth numbers being announced off the low economic activity base in Quarter 1 of 2020.

The better than expected recovery in the world economy towards the end of 2020 together with good progress on the roll out of vaccines resulted in the International Monetary Fund (IMF) adjusting its growth expectations upwards in its April outlook. The IMF expects the global economy to achieve growth of 6% in 2021 after the 3.3% decline in global economic activity during 2020. Advanced economies are expected to grow by 5.1% in 2021 while emerging and developing economies are expected to grow by 6.7% with China leading the way.

Massive stimulus packages in the form of the American Rescue Plan (US$ 1.9 trillion) and the Infrastructure Plan (US$ 2 trillion) will not only support the US economy but also the economies of many of its trade partners. Concerns about rising inflation in the United States on the back of the economic recovery and stimulus packages saw interest rates in US treasuries rising and supporting the US Dollar. Central banks in the developed world remain accommodative with regards to interest rates, which remain at close to zero and in some countries in negative territory. South African economic activity declined by 7% in 2020 but closed 2020 out on a more positive note. The National Treasury expects the local economy to recover by 3.8% in 2021 while the IMF is less optimistic with an expected recovery of 3.1%, up from its forecast of 2.8% growth in January. The IMF’s more pessimistic view is related to South Africa’s slow response in securing vaccines, rapidly growing government debt and fiscal challenges as well as political infighting in the ruling party.

Investment Market Overview

Both the global and local equity market have seen a more than 70% recovery since the lows reached at the height of the Covid pandemic in March 2020. Massive stimulus measures, a V-shaped economic recovery in many countries, strong US company earnings announcements for Q1 2021 and good progress related to the roll out of vaccines have all contributed to new record highs being reached in global equity markets during March and April. The JSE and the rand have also benefitted from improved global investor sentiment as well as more risk appetite being shown for emerging market assets and currencies. Much good news has been priced into global equity markets with an increased concern about bubbles developing in some areas of the market, for example the information technology and resources sectors.

While economic fundamentals, continued fiscal stimulus as well as accommodating monetary policy should continue to support the markets, they have become more susceptible to negative news related to the Covid pandemic and the prospect of rising interest rates as well as profit taking by investors from time to time. The local property market made a strong recovery over the past year and was up by 40% from its lows in March 2020. Local fixed interest instruments continue to offer attractive real yields and the All Bond Index returned 14.7% for the 12 months to 30 April. The rand has recovered by around 30% from a year ago and is expected to remain strong in 2021 on the back of competitive local interest rates and a weaker US Dollar.


This report has been compiled by Sasfin Financial Advisory Services (Pty) Ltd – Co. No.1997/010819/07; a licensed Financial Services Provider – FSP No. 5711 / Sasfin Asset Managers (Pty) Ltd – Co. No. 2007/018275/07; a licensed Financial Services Provider – FSP No. 21664. The contents are proprietary and may not be copied or disclosed without consent. Information and opinions are general and subjective in nature and do not constitute advice. Any references to historical data, assumptions, targets, benchmarks or examples are as indicators/illustrations only and are not fixed or guaranteed. Past investment performance is not necessarily indicative of future performance. While care is taken to provide current and accurate information, no liability is accepted for errors, omissions or subsequent changes and this report remains subject to revision, verification and amendment without notice and without liability to compensate or reimburse any party. Anyone acting on this report before taking appropriate advice does so at their own risk.

About the Author

Johan Gouws
Head of Advice, Sasfin Wealth

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