Almost as soon as we released last week Monday’s edition of this newsletter, rumours began circulating that President Cyril Ramaphosa was to address the Nation that evening instead of on Friday the 15th of January as originally communicated. Naturally enough speculation was rife that the President together with the National Coronavirus Command Council would enforce a harder version of the current adjusted alert level 3 lockdown. As confirmed at the President’s televised address at 8pm that evening, the Nation remained at adjusted alert level 3 but the duration was extended through to mid-February and South Africa’s twenty land borders were closed causing untold chaos and a distinct lack of social distancing at key border posts. Subsequently, schools were required to remain closed for a further two weeks.

The number of confirmed daily positive coronavirus cases in South Africa continues to run between ten- and fifteen-thousand a day with the cumulative case count exceeding 1.3m and deaths in excess of 37,000. The world has either surpassed or will soon surpass two grim milestones: more than 2 million confirmed deaths likely occurred last week and more than 100m confirmed positives is likely to be reached within the next week. However, Johnson and Johnson’s single shot COVID-19 vaccine is rapidly reaching approval and distribution stages (spurring on the share price of locally-listed Aspen Pharmacare) joining the likes of vaccines from Moderna and Pfizer. In addition, President-elect Joe Biden’s inauguration takes place on the 20th of January and, together with the support of a Democratic-led House of Representatives and Senate, a $1.9 trillion coronavirus stimulus plan looks increasingly likely to be approved. Remember the days of the Global Financial Crisis when the Trouble Asset Relief Program, at $700bn, was just about one-third of the third COVID-19 program to come out of the US?

Nearly two trillion dollars isn’t going to fall out of the sky however, so investors are naturally asking what the source of funds is going to be. Higher taxes? Likely. Great levels of debt? Also likely. Both of which on balance should be poor for the US economy and/or the US dollar but during the week the Chairman of the Federal Reserve, Jerome Powell, firmly reiterated the Fed’s commitment to accommodative monetary policy aligned with and in support of Congress’ fiscal policies. This was a necessary action for the Fed to take as markets had begun to price in the removal of stimulus and an eventual lifting of rates (not quite a taper tantrum as during Ben Bernanke’s Chairmanship of the Fed but the market certainly was beginning to think along those lines), such that the yield on the US 10-year rose meaningfully above 1%.

If that wasn’t enough news to work through with you: markets also had to contend with a second impeachment of current US President Donald Trump, just days before he is due to step down anyway as well as the on again/off again nature of the New York Stock Exchange’s implementation of Trump’s Executive Order to delist a number of Chinese companies listed in the US. The NYSE’s vacillation not being the best reflection of one of the world’s premier financial institutions tasked with market governance but that’s a topic for another time. Naspers has been swept up into this, so this isn’t simply a topic of cerebral interest.

Finally, a relatively modest form of load shedding is back (to the extent that four to eight hours of load shedding every second day can be considered modest) and the South African Reserve Bank’s Monetary Policy Committee meets this week. Expectations are moderating for a 0.25% cut in interest rates. Our colleagues at NFB Asset Management have trimmed the local equity exposure of the Stable and Managed Funds by 2.5% during this last week having increased equity exposure by a similar amount roughly a year ago when markets had been driven deeply lower by the pandemic. Feel free to send me an email here should you wish to discuss this, or anything related to your portfolio in further detail. In the meantime, you can find our set of weekly charts here.

Stay safe, wear a mask.

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Please take the following into account:

• Wherever possible, total return indices have been used. These include the effects of dividends, interest and coupon payments in addition to price movements. Please take data presented as, generally, inclusive of price and income effects.
• Performance and other market data excludes the effect of income, capital gains and dividend withholding taxes as well as excluding advice, administration and asset management costs. Please take data presented as exclusive of tax and cost effects.
• Data is based on the previous Friday’s closing prices but as the situation is fluid the market commentary may or may not extend beyond Friday’s close. Other data, links, estimates, etc referred to are correct as at the time of writing.
• Collective investment schemes and other similar products performance information is based on data provided by Morningstar, which is signed off the first week of each month. In general, we will refrain from covering this until sign-off is obtained.
• NFB Asset Management publishes a monthly newsletter called The Rationalist. For as long as these weekly emails are being sent we have elected not to publish The Rationalist. Expect the monthly NFB AM schedule to resume once the lockdown is lifted.
• The previously used Refinitiv data code for Local Bonds (SAFRALL) has been discontinued, therefore a new code (ASAGVAL) has been used for calculations moving forward which is subject to revision in the future.