World Economy

Federal Reserve officials raised interest rates for a third time this year and reaffirmed their outlook for further gradual hikes well into 2019. Growth and job gains have been "strong" and inflation remains near the central bank’s 2% target, the federal open market committee (FOMC) said in its statement. After eight hikes since late 2015, the fed funds rate is now at the highest level since October 2008. Two-thirds of business economists in the US expect a recession to begin by the end of 2020, while many respondents say trade policy is the greatest risk to the expansion, according to a new survey. US confidence indicators have improved more recently, after losing some momentum in Q2 2018. The level of business and consumer confidence argues for continued strong growth. The Japanese market is performing better now, with the Nikkei Index reaching a 27-year high, although the weaker yen is helping. The MSCI Europe Index had a positive return in dollars in the third quarter of +2.3%, but is still negative in 2018 with -1.9%. Brent has risen by more than 20 percent from its most recent lows in August and is currently trading at $85 a barrel.

SA Economy

Employment in South African's non-agricultural formal sector dropped by 69 000 between March and June 2018, Stats SA announced. South Africa's trade balance swung to a surplus of R8.79-billion ($619-million) in August from a revised R5.29-billion deficit in July, data from the revenue agency showed. The Absa Purchasing Managers’ Index (PMI) remained virtually unchanged at a weak level of 43.2 points in September. The price of unleaded 93 petrol will rise 99c, unleaded 95 R1 and diesel R1.24. Illuminating paraffin will cost an additional R1.04 and liquefied petroleum gas (LPG) R1.79 the Central Energy Fund (CEF) announced. The South African new-vehicle market declined by 1.9% in September, compared with the same month last year. Export sales reached a new record in September, gaining 1.2%. The rand lost -2.2% versus the dollar in the third quarter and is now -14.3% versus the dollar in 2018, -10.6% versus the euro and -10.4% versus the pound.

Trends and Opportunities

- 3% GDP growth is forecast this year and next year in the US.
- The FED is expected to gradual raises interest rates well into 2019
- Brent oils is expected to keep hiking for the near future.

"If a window of opportunity appears, don't pull down the shade" - Thomas Peters

The commentary gives the views of the portfolio manager at the time of writing. Any forecasts or commentary included in this document are not guaranteed to occur.

World Economy

The overall US trade deficit in goods and services with the world widened by +12% in 2017 to $566bn, the highest in 9 years. The gap between Chinese goods imported by the US and American goods exported to China rose to a record high of $375bn in 2017. The MSCI Emerging Markets Index is outperforming the developed market index, which is very unusual. The Trump’s trade tariff attacks have undone all the recovery efforts in markets since the initial correction lows. Trump said he had ordered U.S. trade officials to consider tariffs on an extra $100 billion of imports from China, escalating tensions with Beijing. China's commerce ministry said it has initiated a World Trade Organization (WTO) dispute resolution procedure over US tariffs on its import of steel and aluminum. The U.S. economy created the fewest jobs in six months in March, but a pickup in wage gains pointed to a tightening labor market, which should allow the Federal Reserve to raise interest rates further this year.

SA Economy

South Africa's current account deficit widened more than expected to 2.9% of GDP in the fourth quarter due to a smaller trade surplus driven by a rally in the currency late last year, central bank said. Moody's decided to keep South Africa's credit rating unchanged at Baa3 and revised the outlook from negative to stable. SA consumer inflation in February 2018, dropped to 4.0%. The South African Revenue Service (Sars) collected R1.216-trillion for the 2017/18 financial year, representing growth of R72.4-billion, or 6.3%, year-on-year. This was, however, lower than the R1.217-trillion target set by the National Treasury during the 2018 Budget speech. The seasonally adjusted Absa Purchasing Managers’ Index (PMI) dropped back below the neutral 50- point mark in March. The latest Standard Bank Purchasing Managers’ Index (PMI) shows that South Africa’s private sector activity slowed in March, with the index having decreased to 51.1 points, from 51.4 in February. The domestic new-vehicle market expanded for the first time this year as March new-vehicle sales inched up 1.1%, to 49 233 units, compared with the same month last year. Trends and Opportunities

• Four interest rate hikes are still expected in the USA in 2018.
• UK productivity picks up strongly in the second half of 2017
• More SA interest rate cuts are possible due to the low inflation numbers.