Markets In Focus: September market snapshot

Global and local markets came under pressure in September as persistently high inflation, partly stoked by rising oil prices, implied that interest rates would stay higher for longer. Brent crude oil was $95/barrel at the end of the month, having risen by 27% during the third quarter, as OPEC+ members appear determined to stick to commitments to lower production to boost prices.

Towards month-end, global markets were rattled by the possibility of a US government shutdown over failure to reach agreement on a spending bill. A 45-day extension was only agreed on 30 September.

Although central banks in several major economies (US, UK, Switzerland and Japan) held interest rates unchanged, as did the South African Reserve Bank (SARB), the message from the US Federal Reserve was that most members expected interest rates to stay high for an extended period. This pushed US government bond yields to their highest level since 2007, at 4.6%.

Chinese stocks weighed on emerging market indices. Concerns about the health of its property sector are now centred on a second large developer, Evergrande. News that China would ban use of the Apple iPhone in its government offices cost Apple $200 billion in market capitalisation in early September, and the shares have not yet recovered to previous levels.

In rands, the MSCI World Index shed 4.797%. A South African investor in the MSCI World Index would have earned 13.57% over the past five years, boosted by rand weakness.

The JSE’s All-Share Index dropped 2.55% in September, but was supported by industrial metals prices. It has delivered a positive 2.19% for the year to date, while the All-Bond Index was 2.34% lower for the month and a positive 1.47% year to date. The worst-performing sector was property, reversing August’s small gain, with a -4.08% negative return for September.

South Africa’s inflation rate edged higher to 4.8% year on year in August, slightly higher than the previous month’s 4.7%, but still within the SARB’s 3-6% target. However, fixed income markets are uneasy about the shortfall in South African government revenue against budgeted projections after the release of tax collection data. The Medium-Term Budget Policy Statement, which will be released on 1 November, will give clarity on how government intends to tackle the rising deficit.

Table 1: Total returns to 30 September 2023

Source: Morningstar | Total returns annualised to 30 September 2023