April 2018 market overview

Trade restrictions must be one of markets’ least favourite things. And they showed their displeasure after President Trump announced a set of tariffs on steel and aluminium imports from China in March. In April China retaliated with its own set of trade tariffs on a wide range of imports from the US, estimated around $3 billion in value. Trump also announced 25% tariffs on some 1300 industrial technology, transport and medical products.

In Europe, the economy is still growing moderately, but business and economic sentiment is slightly poorer due to strikes and poor weather conditions. Consumer strength is strong in the wake of, among other things, unemployment shrinking from 12.1% in 2013 to 8.7% currently. In the UK, the pound weakened as Britain showed that it grew its economy by only 0.1% in quarter one of 2018 after expanding by a mere 0.4% in the previous quarter.

During April the world also witnessed a major historic moment as the leaders of North and South Korea shook hands and agreed to pursue permanent peace and the complete denuclearisation of the region. Asian markets advanced immediately after the event.

Locally, the good news continued. The IMF raised its forecast for SA GDP growth in 2018 to 1.5%. Inflation slowed to 3.8% year-on-year, the lowest figure since 2011 and the FNB/BER Consumer Confidence Index rose to a record high of +26 points.

During April 2018 the FTSE/JSE All Share Index (ALSI) gained 5.4% on a total return basis, while bonds lost 0.7%. The SA Listed Property Index (SAPY) recovered 7.7% in April, after losses in all three months of the first quarter. Cash returned 0.58%. Internationally, the MSCI World Index gained 1.2% in dollar terms and the MSCI Emerging Markets Index ($) lost 0.4%. For South African investors who measure their returns in rand, the weakening of the rand during the month gave these returns a bit of a boost in rand terms. During April the rand weakened 5.1% against the greenback and 3.4% against the euro.

For the 12 months to the end of April 2018, the ALSI and listed property returned 11.45% and -0.45% respectively. The ALBI returned 13.75% and cash 7.43%. Internationally, the MSCI World Index and the MSCI Emerging Markets Index ($) rewarded offshore investors with dollar returns of 13.22% and 21.74% respectively. Part of these gains were negated by the rand appreciating 6.86% against the US dollar over the past year.