Economic Overview - Efficient Private Clients
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Economic Overview

18 December 2024 Economic Overview - By efpc


December was a relatively tough month for financial markets, although it did end a strong performance year for risk assets. Both equities and bonds reversed during the month. This was amid a rethink of interest rates after the United States (US) Federal Reserve (Fed) exhibited a more cautious outlook for 2025 and some likely profit-taking after the strong run following Donald Trump’s election in November. For the year, global equities still returned more than 17% (in dollar terms), primarily driven by the US market. Despite lagging for the year, emerging markets outperformed during December as Chinese equities rallied, while India and Taiwan also made positive contributions.

Local equities ended the year 13% higher despite experiencing a small decline in December in line with global markets. Resources, specifically platinum and gold, were the biggest detractors for the month. The resource sector was also the only major sector to experience a decline for the full year.

While also experiencing a small decline for December, the performance of local bonds during 2024 is noteworthy. The All Bond Index delivered a return of 17.2% for the year, outpacing most other local asset classes, and posting its best calendar year return in more than 20 years. Despite the uncertain environment over recent months, local bonds have remained resilient and have received support from foreign investors. With an outlook for inflation to remain under control over the next year and scope for the South African Reserve Bank to continue with its rate-cutting path, albeit more cautiously so given the tone from global central banks and geopolitical considerations, local bonds should continue to receive support at current yields.

Some key themes from December were:

  • Gold continued to shine bright in 2024: Despite broader commodities lagging, gold recorded its best year since 2010 in dollar terms, returning more than 27%. The metal’s price was supported by concerns over the US fiscal direction and large-scale purchasing of gold by major central banks (China, India, etc.).
  • The rand remained under pressure: The rand suffered during December and ended the year approximately 3% weaker against the US dollar. Despite the challenging environment for the local currency, the rand was the fourth-best-performing major currency (against the dollar) in 2024.
  • South Africa’s gross domestic product (GDP) disappointed: South Africa’s GDP contracted by 0.3% in Quarter 3 of 2024, with agriculture leading the decline. A 28.8% drop in agricultural output, driven by drought and adverse weather, reduced GDP growth by 0.7%.
  • The US continued on its rate-cutting path: The US Fed announced another well-anticipated interest rate cut at their December meeting, marking the third consecutive rate cut, totalling 1% worth of cuts since September.

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