Now that the uncertainty of the US election is essentially over, it is perhaps a good time to step back and consider where we are and what is likely to happen next.
The, which is an excellent benchmark for in the international markets, appears to be breaking to a new – above the at 3580. Consider the :
You can see here thespike caused by the pandemic which was followed by a rapid recovery to a new all-time record high at 3580. Notably, the downward spike caused by was not sufficient to cause the 200-day to turn down significantly – a clear indication that the long-term was still intact.
The uncertainty around the US election and the second wave of COVID-19 in somecountries has temporarily arrested the upward momentum and held the in a between at 3225 and resistance at 3580 since September 2020. On Friday (13-11-20) the market closed just above that resistance level and now looks set to begin a new . Obviously, are encouraged by the prospect of the second $2,4 trillion and the apparent imminent availability of a vaccine.
Our view has always been that the COVID-19 downward spike in markets was aaberration resulting from a “ ” event. That event temporarily interrupted world economic , but was and remains completely unrelated to the underlying growth trends in the . Now that investors are becoming confident that the pandemic is almost behind us and the uncertainties surrounding the US election are fading, they are driving markets upwards to new highs in anticipation of further stimulus.
The impact of this on theis obvious. International investors are rapidly shifting from a mood of “ ” to “ ” – which is making our high- ing government very attractive. This, in turn, is driving the rand upwards against the US dollar as overseas funds pour into the country. Consider the chart:
We have long believed that the rand was materially undervalued againstand that continued strength was likely. We see the rand continuing to gain ground against first world currencies. This is combining with the weakening price should portend a significant drop in petrol prices in South Africa in the coming months.
As a privateyou should be aware that time is running out to buy those high-quality which are still trading at significant . The strength of the rand will make the traditional shares less attractive and companies with a locally based more attractive. The expected drop in fuel prices will add to other local stimulatory measures to help the recovery of the economy. It will also increase the downward pressure on the rate making further options possible.
Our view remains that the South Africanwill recover more rapidly from the pandemic than most economists are expecting.
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