Consult by MomentumConsult by MomentumA short read, one number, and a walk through every part of a portfolio. If any of it lands on something of yours, that is your cue to reply.
Hello,
Statistics South Africa put out the second quarter numbers this month. The economy shrank 0.2% for the quarter, after growing 0.4% in the first. Trade, catering and accommodation fell 1.9%. Manufacturing fell 1.8%. Mining fell 3.0%. Finance and real estate grew 0.3%, and households kept spending, up 0.4%.
So not a collapse. A stumble, and an uneven one, with the consumer facing and financial parts of the economy still moving forward while the goods producers pulled back.
Here is why that print matters beyond the headline. When growth slows, the Reserve Bank has to weigh two things against each other: keeping inflation under control, and not choking off what little growth there is. I am not going to guess what the MPC decides, because that is their call and not mine to predict. But the direction of that debate is what eventually reaches you. Lean toward supporting growth and that shows up as steadier rates on your bond repayments, softer growth in what a fixed deposit or money market account pays you, and a friendlier backdrop for bond prices, because bond prices and yields move in opposite directions. Lean the other way and the opposite happens.
Either way the chain runs in the same direction: a statistics release, then a policy decision, then the interest rate you actually pay or earn.
So I went through it the way I go through yours. Not one account at a time, but a portfolio that holds a bit of everything, sleeve by sleeve. Open any part that is yours.
What this month did to each part of a portfolio. Tap any part that is yours.
Cash does not react to a growth number directly. What it does notice, slowly and constantly, is inflation eating at what that cash can buy. Over any long stretch that is a far bigger risk to cash than a single quarter's growth figure.
Ask me about thisMoney market and other short term interest bearing accounts move with the repo rate over time. Wherever the rate cycle heads next matters far more to this part of your money than one data point does on its own.
Ask me about thisBonds are the asset class most directly in this conversation, because bond prices react to where the market thinks interest rates are heading. A weaker growth picture is part of what feeds that expectation, for better or worse, depending on which way rates eventually move.
Ask me about thisSouth African equity is not a mirror of the local economy. A large share of the JSE's earnings power sits in globally priced resources and financials, so a domestic growth wobble does not automatically mean a wobble in your local equity fund.
Ask me about thisOffshore equity mostly answers to a different set of questions altogether. This month that included the US jobs report, which showed employers added 162,000 jobs in August with unemployment steady at 4.1%, ahead of the Fed's own rate decision later in the month. That is the channel that moves global shares, the dollar and, in turn, the rand.
Ask me about thisProperty, whether you hold it directly or through a listed fund, tends to be sensitive to the same rate expectations as bonds, because rental income gets compared against what cash and bonds are paying.
Ask me about thisGold remains a significant part of the JSE's resource earnings, which is one reason local equity has not simply followed the domestic growth story downward.
Ask me about thisCrypto exposure came with its own reminder this month that the wrapper matters as much as the asset. The FSCA debarred three senior officers of a JSE listed bitcoin treasury company for twenty years each, over manipulation of the company's own share price. If you hold bitcoin through a listed vehicle rather than directly, that is a governance and regulatory risk sitting on top of the coin itself.
Ask me about thisStablecoins and on chain rails got a parallel lesson in technology risk. A software bug, not a stolen key, allowed roughly $320 million to drain from a bitcoin settlement network used by exchanges. If you use stablecoins or on chain rails, the infrastructure underneath them carries its own risk, separate from whatever the underlying asset does.
Ask me about thisShown for interest, not as a recommendation. Past or point-in-time figures are not a guide to what comes next, and none of these is suitable for everyone.
One more thing worth saying. Vanguard has spent years measuring where advisers add value over time. In their 2020 study the largest single contributor is not fund selection. It is the conversation itself, having someone to talk to when the headlines are unsettling. That is most of why I write this.
So here is what I would ask you to sit with. When a number like this comes out, does your instinct pull you toward checking your statement, or toward calling me? I would rather have the conversation.
Jürgen
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