At the end of October markets in general were very much treading water with a slightly weaker bias. The JSE All Share was down for the month but the All Bond Index was marginally firmer. The Rand was little changed against the USD. In other words, not a great deal was happening.
Come November 8th and everything seemed to change as we contemplated the actual prospect of Donald Trump becoming president. Markets reacted negatively initially but then seemed to recover. Adopting a surprisingly optimistic tone, the onset of Trump was suddenly seen as a positive for business and equities. The spurt in the gold price was short lived. Trump himself appeared conciliatory, humble even, in his first post election pronouncements but not everyone was convinced – far from it. The prospect of the Trump spending programme and higher interest rates was not good for Bonds with yields rising significantly. This had a negative knock on effect into the property sectors globally.
It is far too early to judge exactly what a Trump presidency will bring to the US and indeed to global markets. We concur with most financial commentators that this is not the time for panic or radical changes to investment positions although we still believe in diversification as being the best defence against sudden shocks, whatever they might be.
Locally of course we have numerous issues to concern us. Whereas Pravin Gordhan appears safe for now we do not know for how long. The economy remains in a very low growth path with little sign that this will improve significantly any time soon. The worry remains, therefore, that SA may be subjected to a ratings downgrade in December which will result in the cost of borrowing increasing with all that that might entail for the country. If we manage to avoid the downgrade then perhaps we can be quite a bit more optimistic as far as 2017 is concerned.