South Africa, like the rest of the world, is set to enter the ‘great unknown’, where political uncertainty begets market volatility. <\/p>\n\n\n\n
This is according to Discretionary Fund Manager Cogence, a partnership between Discovery and the world’s largest asset manager, Blackrock, which believes that the debate around whether the world will achieve a soft landing in 2024 is misplaced. <\/p>\n\n\n\n
Cogence CEO and CIO Jonel Matthee-Ferreira said that an unexpected rally in the global equity market in 2023 is welcome but not universal. <\/p>\n\n\n\n
\u201cWhat shouldn\u2019t be overlooked is just how narrow this has been – led by a mere handful of mega-cap American tech companies benefitting from the normalisation of the United States economy after the pandemic,” said Matthee-Ferreira. <\/p>\n\n\n\n
Cogence said that the impact of profound structural shifts currently underway is a more relevant conversation for the coming years. <\/p>\n\n\n\n
The global investment regime is changing from Great Moderation – a long period of stable growth and inflation – to the Great Unknown – characterised by geopolitical fracturing and higher interest and inflation rates. <\/p>\n\n\n\n
Matthee-Ferreira and Cogence investment specialist Kerri-Ann Sattary sat down with BusinessTech to explain what the ‘Great Unkown’ means for South Africa: <\/p>\n\n\n\n
Interest rates <\/strong><\/p>\n\n\n\n Matthee-Ferreira said that global interest rates will likely stay higher longer as inflation remains sticky. <\/p>\n\n\n\n The US economy has been resilient despite elevated inflation and interest rates. <\/p>\n\n\n\n Considering the USA’s 2.5% growth in GPD in 2023, there is less urgency for the Federal Reserve to cut interest rates to boost economic growth. <\/p>\n\n\n\n Although South Africa’s GDP growth was only 0.6% in 2023, any interest rate cuts from the South African Reserve Bank (SARB) will likely only follow cuts in the US. <\/p>\n\n\n\n However, rate cuts in South Africa are still expected to occur in the second half of 2024, with inflation expected to be within the SARB’s target range and the need to stimulate the economy. <\/p>\n\n\n\n