Next Week is Big For SA

Next Week is Big For SA

Next week, we see two events that may significantly impact the SA markets.

We have the second attempt at passing the national budget through parliament, which appears to be agreed upon, but we will only know for certain next Wednesday.

We also see the latest local inflation data being released on Wednesday, with a strong possibility of a further interest rate cut the next day.    

Lower inflation is great news for markets and the risk assets of shares, property and bonds, where lower inflation and interest rates present a positive framework and environment for investment markets and, therefore, are welcomed.   

Global Risks Receding

In March, our local inflation data showed we were due an interest rate cut in SA. Still, our Reserve Bank decided to keep interest rates unchanged, citing global risks of higher inflation as a result of the Trump Tariffs, creating uncertainty enough to delay these interest rate cuts.    

Since then, earlier this week, US inflation to the end of April came in lower than expected at 2,3%;

In turn, US Core CPI (CPI inflation excluding food and energy prices) also increased 0,2% for the month, while the year-over-year level was 2,8%, in line with expectations.

This means that offshore inflation looks more benign than previously thought, giving our Reserve Bank reason not to fear rising offshore inflation, which may impact SA, where we are a net importer of goods and services.

Our Expectations for Inflation and Interest Rates

Old Mutual’s Chief Economist, Johann Els, previously stated that, based on inflation data on the back of lower fuel prices, not seeing an interest rate cut in March was a mistake.  

He now says that he expects local SA inflation to come in around 2,5% to 2,6% next week to the end of April and that this will most likely mean an interest rate of 0,25%, followed by another 0,25% interest rate cut in July.   

Even at 2,6%, inflation now is exactly half the inflation rate from a year ago in April 2024 when it was 5,2%, representing a remarkable improvement over the last year.  

The further implication is that lower inflation and interest rates should also see some further Rand strength (all other things being equal), resulting in lower inflation expectations in the future over the medium term.   

Overall, lower inflation and interest rates are very positive for investment markets and client investment portfolios.

That Extra Bit from Private Clients’ Securities

Attached please find the latest That Extra Bit from PCS, where they share a few interesting articles on some of the companies they hold in their portfolios. 

In this week’s issue:

• Nestlé invests in next-gen nutrition with new biotech and tech hub

• The world’s most valuable companies in 2025

• MTN sees big expansion in profit margin and subscriber growth

If you have any Old Mutual product you can register for their rewards program FOR FREE and get cash back every month for just having that product.

Here is a link straight to the registration page: Welcome - South Africa - Old Mutual Rewards

FRIDAY FOOD FOR THOUGHT