South African Markets
In the fourth quarter of 2024, South Africa's stock market experienced a downturn, with the FTSE JSE All Share Index declining by 2.1%.
The South African rand exhibited volatility during the quarter, weakening against major currencies. Despite currency fluctuations, the FTSE All Bond Index (ALBI) managed a modest return of 0.4% for the quarter, with nominal bonds finishing the year with a robust 17% gain.
The South African Reserve Bank (SARB) reduced the repurchase rate by 0.25% to 7.75%, aligning with market expectations. Inflation continued its downward trajectory, falling below the SARB’s target range for the first time in over three years. Despite the significant downward revision of the SARB’s inflation forecast, the decision not to opt for a more aggressive 0.5% interest rate cut was somewhat unexpected.
The formation of a new coalition government, following the African National Congress losing its parliamentary majority, has improved business confidence and reduced power outages.
International Markets
In the fourth quarter of 2024, global financial markets exhibited notable resilience and growth, defying earlier expectations of a slowdown.
USA
The S&P 500 surged by 24%, driven by advancements in artificial intelligence and robust U.S. economic performance. The re-election of Donald Trump further bolstered market optimism, with anticipated tax reductions and deregulation enhancing investor confidence.
UK
The British pound slid to a 14-month low of $1.2140, influenced by a strengthening U.S. dollar and rising government bond yields. Additionally, oil prices spiked by over 1% due to expanded U.S. sanctions on Russian oil, affecting supply to China and India.
China
China’s economy expanded 5.4% year on year in the fourth quarter of 2024 however the prospect of increased U.S. tariffs under President Trump's administration poses a significant risk to China's export-driven growth, necessitating strategic economic adjustments. In response to these challenges, the Chinese government has implemented various stimulus measures, including interest rate cuts and infrastructure spending, to bolster the economy.
Analysts anticipate that sustaining a growth rate close to 5% in 2025 will require continued policy support and effective management of external trade pressures.
2025 Outlook
Global headline inflation is expected to decline in 2025 but risks of renewed inflationary pressures remain. Elevated policy uncertainty and averse trade policy shifts could disrupt global trade and growth and geopolitical tensions, particularly in the Middle East, could have spill over effects on global markets.