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Momentum Investments Market and economic outlook: April 2021



  • While the more risky asset classes enjoyed the improving growth picture during the first quarter of 2021, global bonds started fretting about the potential for tighter monetary policy.

  • As a result, global bond returns (-5,8% in dollars) were particularly poor in the quarter, falling far short of the positive dollar returns provided by SA equities (12,3%), developed market (DM) equities (5%) or emerging market (EM) equities (2,3%). South Africa (SA) and Europe were the best-performing EM and DM equity markets, respectively, in the quarter and by large margins.

  • SA equities also provided the highest returns among the local asset classes in the first quarter of this year (13,1% in rand terms), by far outpacing returns from listed property (6,4%), inflation-linked bonds (4,6%), cash (0,9%) and particularly nominal bonds (-1,7%).

  • In our view, risky asset classes should continue to benefit from the ongoing recovery in global growth as long as the current supportive monetary and fiscal policy settings remain in place internationally.

  • We expect returns from SA asset classes (particularly local equities) to benefit from such a conducive global risk-on environment, as well as from a more favourable valuation backdrop than global assets. SA nominal and inflation linked bonds look attractive, but not cash or listed property.

  • Globally, our preference remains for equities over fixed-income assets.


  • Global economic growth rates are continually being revised higher for 2021 on the back of fiscal stimulus and progress with vaccinations.

  • World employment may decline further in 2021, albeit at a slower rate compared to 2020.

  • Countries that achieve herd immunity faster should be first to normalise fiscal policy in terms of reducing fiscal deficits through lower government spending and possible tax increases.

  • Higher domestic personal income tax (PIT) collections and stronger global economic growth suggest SA’s economic growth rate in 2021 may receive support from household consumption expenditure (HCE) and inventory building.

  • Consumer price inflation (CPI) is on the rise, but estimated to subside in the second half of the year.

  • The repo rate is expected to remain unchanged in 2021.

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Market and economic outlook - April 2021
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