The Connector
14 December 2022
5 min read

Investment markets

Q3 of 2022 saw some mixed performances in investment markets. SA shares fared better than their global counterparts, although losses were experienced across all major sectors. Financial shares came under pressure as they started to price in higher risks of economic slowdown and potential non-performing loans. In SA, cash and bonds had positive returns for the quarter, but bonds remained negative for the year to date period.

Globally, the S&P 500 was down almost 25% for the year to date in dollar terms, but -10.5% in rand terms. For Q3 of 2022, the S&P 500 was down 5% in USD and up 5% in ZAR, showing how Rand weakness improved returns for local investors. Foreign exchange has been a key driver of investment returns. For the first time in two decades, dollar strength saw the EUR/ USD cross rate fall to below parity. In the UK, the sterling reached a lifetime low against the dollar, surpassing the depths of the mid-1980s.


Global growth forecasts continued to be revised lower. Contributing factors remain the war in Ukraine, supply chain bottlenecks and energy crisis, and more recently, a much tighter monetary policy stance globally. South African growth has been revised lower for both 2022 and 2023, with long-run growth estimates all trending towards 1.5%. SA’s potential growth remains negatively impacted by energy shortages and strike action in multiple industries.

Another issue to consider is the potential “greylisting” of South Africa because of apparent laxity on anti-money laundering and terror finance measures. This could have a material impact on SA’s ability to raise funding and the cost of the funding which could present a material downside growth risk into next year.


While inflation dominated news in Q3 of 2022, the data shows that inflation may have peaked. Inflation in the US has
declined from 9.1% in July to 8.2% in September. The US remains ahead of the global curve in tightening monetary policy. While US inflation appears to have peaked, Eurozone and UK inflation remains elevated at close to 10% year on year and has yet to show signs of peaking. The concern is that core inflation does not appear to be responding as directly to rate hikes as expected.

South African inflation peaked at 7.8% in July and was at 7.5% in September. It has now spent a consecutive five months above the SARB’s targeted 3-6% range. Concerns are around transport inflation (+17.9%) and food inflation (+11.9%). Global central banks have continued to raise lending rates to try curb inflation. The South African Reserve Bank aligned with a larger than expected 75bps hike in July, followed by another 75bps hike in September.


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