August 2018 market overview

The US economy soared in August, with the markets setting new four year highs. The current 9.5 year long bull market is the longest in history. Not even President Trump’s criticism of the Federal Reserve’s decision to increase rates could keep the dollar down for long. Positive sentiments were further increased as Apple became the first company to achieve a trillion dollar status, and TESLA shares skyrocketed following Elon Musk’s tweet suggesting the company go private.

In direct contrast to the success of US markets, Asian markets continue to drop significantly from July. Following another round of casual fire in the ongoing trade war between the US and China, the countries have returned to trade negotiations. But, the Chinese markets saw investors opt for more stable prospects and the Renminbi dropped further, even as the People’s Bank of China raised the cost of betting on the currency. The Yen fared better and Japanese markets remain less affected by trade war concerns. The same could not be said for East Asia, as further sanctions on Iran caused oil prices to increase dramatically.

Emerging markets continue to take the heat for the faltering Argentinian Peso and Turkish Lira. The standoff between Turkey and the US, involving the detention of US pastor Andrew Brunson under terrorism allegations and the frozen assets of Turkish politicians, has cast doubt over the stability of emerging markets as a whole. The Lira hit a record low, dropping more than 40%, and the Peso dropped over 50%, from the start of 2018. The Eurozone markets declined as French and Spanish banks exposed to the Turkish currency took on increased risk.

Locally, the markets took a seat alongside Turkey and Argentina for most of the month, with the Rand dipping over 10% as Trump suggested trade tariffs would be targeting South Africa next. Even as the markets recovered, warnings that Moody’s may downgrade SA plague local investors.

During August 2018 the FTSE/JSE All Share Index (ALSI) gained 2.34% on a total return basis, while bonds lost 1.87%. The SA Listed Property Index (SAPY) gained 2.15% in August. Cash returned 0.59%. Internationally, the MSCI World Index gained 1.24% in Dollar terms and the MSCI Emerging Markets Index ($) lost 2.68%. In August the Rand declined 10.60% against the greenback and declined 10.09% against the Euro.

For the year to date index measures, the ALSI and listed property returned 0.35% and -20.08% respectively. The ALBI returned 4.5% and cash 4.77%. Internationally, the MSCI World Index rewarded offshore investors with 4.85% in Dollars while in the MSCI Emerging Markets Index ($) declined with 7.07%.