Market Overview

In-depth market commentary detailing market performance over the quarter

If only the last quarter’s performance could be banked into the rest of 2023. 

Quarter Four (Q4) of 2022 marked the best-performing quarter of the year for equity markets across the globe.  While 2022 was an extremely challenging year for investment markets, the final quarter saw some relief as the slight shift to a risk-on environment (when investors are prepared to adopt greater risk – selling out of safer haven assets (cash and bonds) in favour of risker assets (equities) – in their pursuit of higher returns) supported the market rebound.  However, significant headwinds persist which could derail this prevailing recovery.  This necessitates continued caution.

Over the quarter:

• The local equity market (+12.22%) outperformed developed (+9.77%) and emerging markets (+9.70%) in both base currency and rand terms.  The risk-on environment over the quarter saw the rand strengthen against the dollar by 5.6%.  This rand strength reduced the overall degree of positive returns provided by the offshore markets and further increased the relative outperformance earned by the local equity market.

• Listed property (+19.31%), Resources (+17.56%), Industrials (+15.67%), and Financials (+13.92%) all contributed substantially to the local market returns over the quarter.

• Q4 of 2022 represented the only positive quarter for both the developed and emerging world equity markets as the previous quarters each earned negative base currency returns amid the challenging global backdrop.  Considerable market volatility and uncertainty have plagued 2022 with subdued global trade expectations and global recessionary fears.  Increasingly restrictive monetary policies from global central banks – given their concerns around longer-lasting inflation – have kept markets in a tailspin for most of the year.

• The global developed equity markets earned +9.77% over the quarter and -18.14% for the year in dollar terms, while emerging equity markets earned +9.70% over the quarter and -20.09% over the year in dollar terms.

• Investor sentiment improved slightly as the hunt for yield picked up with global government bonds posted a +3.82% over the quarter after a 9-month return of -21.27%.

• In November 2022, the South African Reserve Bank (SARB) raised the repo rate for the 7th consecutive period by 0.75% to 7%.  This represents an overall 3% interest rate hike over the calendar year in their efforts to reduce inflation.

• Headline inflation (CPI), which peaked in July 2022 at 7.8%, subsequently slowed to 7.4% in November.  While this level remains above the top end of the SARB’s target range (3% – 6%), it provides some comfort that inflation is likely topping off and not increasing further.

• The local bond market (ALBI) delivered positive returns for the quarter of +5.68% ahead of local cash (STEFI) at +1.57%, as the risk-on environment pushed up bond prices.

In previous market commentaries, we have spoken of the old adage ‘it’s not about timing the market but rather the time in the market that matters’.  This past quarter re-affirmed this message.  Whilst a myriad of global factors continues to threaten a further protracted economic and investment market recovery, investors who have exited the market (in their pursuit of timing it) would have been denied the meaningful investment return bounce over the past quarter.  

GTC has always maintained that remaining invested, in line with one’s investment objectives, is a key component in achieving one’s financial goals.