Another interesting week passes us by as markets waited in anticipation of how the new year was going to play out.
After every prediction for 2020 being completely smashed, many are tentative to put their heads on the block and make a call.
But that being so, there is some optimism that things cannot be any worse than 2020, and that things must soon get back to normal...
...but is this the case?
This is what we will take a look into this week, with our Rand Review as we look at where the Rand and markets stand heading into 2021.
And before we look at the 5 days, here were the biggest headlines:
- Lockdowns Reduced - while remaining at level 3, locals now have more liberty to move around with reduced restrictions in South Africa
- US Jobs - a boost came in January, but still scary-high jobless claims showed that the economic fight was far from over
- US Stimulus - with power in the hands of the Democrats, they began to steamroll their way toward passing the stimulus package they wanted...how will market react?
- Zimbabwe Troubles - with the economy in turmoil, costs way up from the pandemic, the former bread basket of Africa was turning to other sources to get through...
To start with the local unit, we opened the week around R15.15 to the Dollar, with the ZAR on the front foot even after a volatile previous week.
As we said at the beginning, all local eyes and actually global eyes are on what effects a good start to 2021 will have.
There is optimism that things are going to change, everything get back to normal and us see a year of HUGE recovery and growth in the markets...
...as much as we would like to believe this, we are here to present you with our realistic views, not what would be ideal.
Something to remember whenever looking at the markets and someone is making predictions based purely on FUNDAMENTALS, you should be very careful.
Case in point, look at the beginning of 2020, expectations were high for another year of growth. The fundamentals seemed to look good.
Yet markets are not dictated nor defined by fundamentals - they are moved by mass human sentiment. And the way emotions affected traders, investors and businesses this past year has never been more evident.
There are many other examples too, where you can see that logic just does not apply to the markets.
And the reality is that whatever governments and central banks have done to try and prop up the debt house of cards, it comes at a price that will have to be paid sometime.
You cannot 'print' stimulus without consequences!
And those consequences may not come at the time, but will certainly come in the future...
...and this day of reckoning for the markets is surely coming in 2021 or latest 2022, even as lawmakers in the US debate more stimulus packages now.
Countries like Zimbabwe have run up USD 300 million in expenses related to the pandemic in 2020, and have proposed that their own citizens pay for vaccinations, which did not go down well.
China then stepped up to the fore, offering 200,000 free vaccinations for Zimbabwe citizens. Which is great...but remember that every action has an equal and opposite reaction. China's attempt at influence and infiltration into Africa is no secret - watch these kinds of "gifts", because they come with terms and conditions, OR are a bartering tool later down the line.
Watch this space...
To get back to the Rand though, we saw a gentler week in the markets, as we traded back below R15, touching as low as R14.88 on Wednesday!
And then in other news:
- Locally, there has been some cheer as a result of the President’s announcement of an easing of lockdown restrictions has helped to make the country take one step closer to normality. Beaches are open, alcohol is unbanned (again) - but everyone is looking to see if there will be some actual consistency in what the government proposes, and not another chop and change. This was coupled with reports that the country has secured an additional 20 million vaccine doses. The fiscal cost of SA’s inoculation plan is still up in the air and will be a hot topic in Finance Minister Tito Mboweni’s budget speech on the 24 February (did someone say higher taxes… eish).
- Staying on local shores, Ford Motor Group has announced its plan to invest R15.8 billion into its South African operations. A notable move that will see production scaled up and create around 11 200 jobs.
- Over in the US, 49,000 jobs were added in February instead of the expected 50,000 - so much what the markets were looking for. On jobless claims, there were 779,000 instead of the 830 000 expected - the best levels since November. While these figures are not at all good, but is slight improvement. The question is whether it is sufficient recovery to indicate better days ahead, or if just a temporary bump...?
- The concern around the economy certainly remains, as the Democrats pushed on using every inch of power that they had to get their USD 1.9 trillion budget approved after a 50-50 tiebreak in the Senate vote. This lays the path for the US Stimulus, which will likely follow in similar manner in the coming weeks.
- And then, of course, there is the fallout from the GameStop/Robinhood saga, which continues to play out. Robinhood has apparently put its IPO on hold, trying to raise funding while facing significant litigation as to its actions in restricting trading. Their CEO is expected to testify before Congress week after next. Watch this space...
Getting back to the ZAR, we saw considerable gains from the local currency through Thursday and Friday until we eventually touched all the way down those sub R14.90 levels again from being up above R15.10...
What a fascinating few days - the rollercoaster continues!
The Week Ahead (5-9 February 2021) |
As we look to the week ahead, apart from all of the other points we have discussed, there were a bunch of economic events coming up:
- SA - State of the Nation Address
- USA - Consumer Price Index, Jobless Claims, Retail Sales
- UK & EU - UK & EU GDP, Consumer Price Index
All eyes will be on the State of the Nation Address and what President Ramaphosa has up his sleeve that will give some direction to an economy that is stuttering along and has suffered considerably from all the lockdowns.
And then, of course, across in the US we have President Trump's impeachment hearing, which could prove interesting (even if the result appears to be dead in water based on needing 2/3 vote in the Senate) as evidence of election fraud and foreign interference continues to come to the fore.
Bottomline: Don't expect a quiet February!
As for the Rand, while it has had a good week or two, we do not expect this to continue for much longer, with markets likely to be volatile.
We will continue to look to our Elliott Wave based forecasting system to give us some direction for the days, weeks and months ahead.
Please take our Rand forecasting service for a test-drive!
This will give you access to the same charts we are to give us and our clients the likely direction of the Rand - ahead of time, enabling you to make educated and informed decision.
Simply use the link below to get access now. No charge. No card. All yours to trial for 14 days.
(You don't want to regret not having done so this time next week...)
Look forward to hearing from you.
To your success~
James Paynter
