Election ANC-xiety
The month of May ended with all eyes focused on South Africa’s national elections. In
a historic upset, akin to a championship team losing its long-held title, South Africa’s
African National Congress (ANC) stumbled, losing its majority for the first time since
Nelson Mandela’s triumphant post-apartheid victory 30 years ago.
The ANC’s decline is like a team plagued by injuries and poor strategy, struggling to
stay in the game. Persistent socio-economic woes, soaring unemployment, rampant
crime and entrenched corruption have eroded public trust. Thus younger voters,
disillusioned with the ANC’s performance, have sought new champions.
As a result of the uncertainty surrounding the election results, it’s no surprise that local
assets came under pressure. During the last week in May, The FTSE/JSE Capped Swix
Index retracted by c. -3% resulting in a monthly gain of +1% (YTD: +1.6%). Local bonds
didn’t escape the malaise during the last week of the month, resulting in the FTSE/JSE
All Bond Index posting a monthly gain of +0.8% (YTD: +0.3%).
The ANC now faces the unfamiliar task of forming a coalition government, This new era
of coalition politics could bring greater accountability and change to South African
governance, signalling the end of one-party dominance and the beginning of a more
competitive and dynamic political league.
Globally, markets experienced increased volatility. In the US, the first-quarter earnings
season delivered generally successful results, providing needed support for stocks
amid inflation uncertainty and its implications for the Federal Reserve. The technology
sector was the heavy lifter driven by Nvidia’s meteoric rise, which propelled the Nasdaq
100 Index to a +6.4% gain for the month (YTD: +10.5%).
In Europe, inflation unexpectedly rose, creating uncertainty about the European Central
Bank’s (ECB) policy stance. Despite this, the ECB is still leading the race to the first rate
cut, supporting European equities with the Euro Stoxx 50 ending the month up +2.1%
(YTD: +12.4%).
Japan’s markets saw mixed performance amid ongoing speculation about monetary
policy normalization by the Bank of Japan. The yen continued to depreciate, and
inflation in Tokyo accelerated but remained below the central bank’s target, reducing
immediate pressure for rate hikes.
Overall, May was characterized by cautious sentiment driven by inflationary concerns,
monetary policy uncertainties, and mixed economic data across major regions.
Article by Corion Capital