The quarter ending 30 November 2022 saw a strong recovery in the South African All Share Index, as well as local markets further to a significant reduction in inflationary concerns and supply chain issues. Although we believe that we are not yet at the end of the interest rate hiking cycle, central banks and Governments are seeing a tempering of the rampant inflation as a result of the rapid increase in interest rates. This, combined with China starting to relax their approach to the zero-Covid policy, has allowed global supply chain constraints to abate somewhat. It remains to be seen if shipping rates will continue to fall, which will ultimately benefit the consumer as lower transport costs will result in lower prices for necessary staples in particular.

South Africa has not been immune to the rising interest rate environment, which has negatively affected those with debt, but has had a positive effect for those looking to increase their income. As South Africans are relatively familiar with inflation, we have weathered the global inflation storm better than most. Of deep concern are the developments in the political sphere as Cyril Ramaphosa walks a particularly delicate political tightrope, as a result of the Phala Phala investigation following the explosive revelations made by Arthur Fraser, a Jacob Zuma supporter. There is, and will continue to be, a massive struggle for control at the National Executive Committee meeting of the ANC later this month, and one has a sense that anything can happen from one day to another. The Rand weakened on rumors that Cyril Ramaphosa was about to resign but recovered slightly when the ANC voted to oppose the Section 89 ruling, otherwise it has been relatively stable over the quarter.

In the United States there are concerns over the housing market and “property bubble”, as interest rates continue to rise quickly. We have seen a weakening of the US Dollar as a result of more certainty coming back to other currencies. It is refreshing to note that there has been some cooling of international tensions, resulting in a meeting between China and America however it remains to be seen whether these two nations can find constructive ways to work together.

China’s relaxation of their Draconian lock-down measures in line with their zero-Covid policy should help boost their economy, although they do have the ability to cut rates further. The historic third term appointment of the current regime was met with some concerns around the continuation of the existing policies, although this has moderated in the weeks after this re-election.

Europe, now in the grips of what has already been a fairly extreme Winter, has prompted Russia to attack vital infrastructure in order to worsen conditions for the Ukrainians. Moscow has again voiced their commitment to continuing with this invasion despite many military setbacks and defeats. One hopes that the harsh conditions will affect the Russian troops and result in less conflict until this region thaws in the New Year. It has been encouraging to see that countries once reliant on Russian energy have been seeking alternatives, particularly the Scandinavian countries and Germany and the cap on Russian oil prices has resulted in a drop in oil prices, particularly in America. The increased cost of living (in some instances utilities have more than quadrupled in cost) is having a negative effect on consumers and the bitter cold at this time of year will only increase this pressure. However, it is hoped that once political tensions ease in this region, some semblance of normality could return.

Globally, there has been a cooling in the accelerated input costs, particularly fuel, energy, shipping and basic consumer staples. Given the high interest rate increases, as well as China beginning to open up again, we have seen these input costs begin to moderate and one would sincerely hope that we will see a normalization in these and other costs for all consumers.

We would like to take this opportunity to wish you and your families a safe and festive Christmas period.  Please note that our office will be closed between Christmas and New Year, as well as on the 9 December 2022 from 12.00, when we will host our annual Christmas party.  In addition, we would like to thank our colleagues, as well as all our clients for the continued support, and we look forward to the potential that the New Year will bring us all.

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