Our Market Snapshot provides an overview of key events that influenced financial markets over the course of August 2023.

August brought a broad sell-off in riskier global assets such as equities and emerging market securities, as well as developed market bonds, as investors remained skittish despite broadly improving economic conditions that saw an increasing number of countries report further moderations in inflation. Consequently, investor views of the path of global interest rates consolidated around a pause in the rate hiking cycle in major economies such as the US, and even an end to it in certain countries. Importantly, the US economy remained surprisingly strong and increasingly likely to escape any recession, although the ongoing slowdown in China showed no signs of easing, which remained a key concern for global growth prospects and commodities.

In South Africa, the JSE sold off more than developed markets but fared better than its emerging market peers, returning -4.8% for the month. The best performing sector was Listed Property with 0.83%, while the worst performing sector was Resources with -9.6%. Global equities (as measured by the MSCI All Country World Index), returned -2.8% (in USD). EM equities (MSCI Emerging Markets Index) underperformed developed market equities, delivering a -6.2% return vs -2.4% (also in USD). South African bonds (All Bond Index) posted a -0.2% total return, helped by their high yields. Finally, the rand depreciated by 3.9% against a broader basket of trading partners’ currencies.

Given the bearish market returns for the month, M&G fund performance was also in negative territory across most fund types, with the exception of the M&G Global Feeder Funds, which benefited from rand depreciation to post positive rand-denominated returns. Over the past 12 months, however – and over the longer term – investors continue to benefit from solid, inflation-beating returns from nearly all M&G funds, and in our view they remain well-positioned to take advantage of improving market sentiment. Local assets remain cheap on both a relative and historic basis, offering excellent potential returns for patient investors. At the same time, growth prospects are more robust given the approach of the end of the long interest rate hiking cycle. Investors who have been favouring cash in the past two years would do well to consider moving into more diversified funds that have stronger prospects of earning higher returns as the environment evolves.