South African President Cyril Ramaphosa’s State of the Nation Address (SONA) was held last week and next week we have his deputy, the South African Minister of Finance Tito Mboweni, tabling the National Budget. Think of the former as the words of a CEO, meant to lay out the grand/macro strategy and to inspire the nation, and the latter as those of the Financial Director, meant to set out how exactly this vision will be paid for and how pre-existing financial challenges will be overcome. Doing so allows one to feel somewhat less underwhelmed by the former which we’ve seen referred to as Same Old Notions Again; particularly by the journalistic team at news24. Along these lines, we composed an editorial piece which was picked up by the Business Day ahead of SONA here and we’ll be doing an extensive series of pieces shortly after the budget speech, some of which will arrive directly in your mailbox so please do be on the lookout for that.

Last week was another excellent one for risk assets: the JSE All Share Index set another record all time high, now trading comfortably in excess of 66,000 index points and raising concerns that valuation excesses in offshore markets have now arrived on our shores. Particularly as South Africa’s Covid-19 vaccine rollout remains significantly behind those of the developed markets. Local listed property also had another strong week, up by more than 4% for the week by Friday’s close. The rand strengthened considerably, extending its recent gains below 14.50 to the US dollar. And bitcoin exploded upwards as Elon Musk first tweeted about bitcoin and then as Tesla itself bought $1.5 billion of the cryptocurrency. Bitcoin had been trading weaker to that point, but Elon/Tesla’s commentary saw its price turnaround and rise 12% on the day and then continue on towards nearly $50,000 a coin. That’s R750,000 for a single coin for those keeping score, the price of a luxury motor vehicle or a very healthy deposit on a two-bed, two-bath apartment in a decent location.

Also of interest is the recent rise in fixed income yields. It’s well-telegraphed by now that the US 10-year yield has been bumping up against recent highs. It’s now just under 1.2% per annum. Less well known perhaps is that South African short-term yields, in this instance measured by the 2-year yield, have ticked up of late. They’re now at their December 2020 highs, indicating that South African interest rates are perhaps at their lowest point for the current cycle; despite the Reserve Bank voting 3-2 for maintaining the repurchase rate. The point being that it would have taken just one Member to vote the other way for rates to have fallen by 25 basis points. It’s exceedingly early in the cycle, but at some point in the future interest rates will rise which will be most welcome to those investors who are reliant on income yields and who have seen those yields halve over the last year as the Reserve Bank responded to the economic consequences of the pandemic.

Speaking of offshore markets and coronavirus vaccines: Trump’s second impeachment trial ended in an acquittal. Apparently, it was the shortest American impeachment hearing in history and technically opens up a run at the Presidency for Trump in 2024. Incumbent President Joe Biden’s $1.9 trillion stimulus package continues to make its way through the US Congress and it’s now looking likely for a March approval. Talk in the markets is that it will be swiftly followed by a massive infrastructure program to be launched in the US in spring, so roughly June/July for us. In terms of the pandemic, good progress is being made with herd immunity previously theoretically being achieved in 7 to 8 years in most markets now coming in sooner. Canada went from 10 years to 7 years in the last week alone. Unfortunately, both Auckland, New Zealand, and Melbourne, Australia, have had to implement citywide lockdowns and AstraZeneca’s vaccine proved ineffectual against the ‘South Africa’ strain setting back South Africa’s rollout. Government must be commended though for having the bravery to make that call early in the process, allowing them a swift pivot toward the Johnson & Johnson vaccine.

As always, our weekly set of charts can be found here. And as an additional reminder, the webinar to be jointly hosted between NFB Private Wealth Management and Ninety One’s endlessly entertaining and informative Jeremy Gardiner can be joined here. The webinar is this Thursday the 18th of February at 11:30am.

For those of you who are interested or who have missed the invitation sent out last week, NFB Private Wealth Management together with Ninety One is virtually hosting Jeremy Gardiner on Thu‍rsday the 18‍th of Feb‍ruary at 11‍:30‍am. The topic of his talk is “Rebuilding after the storm.” Gardiner is an excellent, entertaining speaker and coming as it does a week or so ahead of the budget speech from Finance Minister Tito Mboweni, his talk is likely to be highly informative. Click here should you wish to secure an invitation. In the meantime, our weekly chart book can be found here. Stay safe, wear a mask, look after yourself and your loved ones.

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