“The difficulty lies not so much in developing new ideas as in escaping from old ones.”
– John Maynard Keynes, a British economist
These words especially resonate with us today as we evaluate the impact that Covid-19 will have on consumer behaviour and the way businesses will be reshaped. For example, to maintain business sustainability during lockdowns, firms needed to respond quickly to enable employees to work seamlessly from home. Furthermore, in a technology context, there are many moonshot initiatives, which UBS describes as ‘ambitious, exploratory and groundbreaking projects that have disruptive potential’, without necessarily focusing on short-term profitability. Within the South African economy, such investment opportunities are difficult to access, but at the same time, these disrupters can have a major impact on our local consumers and businesses. This implies that both on the local and global stage, yesterday’s leading corporates may not necessarily be tomorrow’s winners, a trend which Covid-19 has brought harshly to the fore!
At Dynasty we continue to challenge ourselves to ensure that our clients are appropriately positioned for these shifts.
- On Monday, the S&P 500 rose above the losses that it experienced in the first part of 2020, rising more than 44% since its low in March. This was encouraged by the optimism of a speedy economic recovery and bolstering from the Federal Reserve. However, the S&P fell sharply by 6% yesterday, this being caused by the Fed giving a grim assessment of the future of the US economy and concerns of a potential second wave of Covid-19 cases.
- The Fed has said that it sees near-zero interest rates lasting through to 2022 to curb the damage from the Covid-19 pandemic. They anticipate that unemployment will stay elevated for years and predict a gradual economic recovery from the pandemic-induced recession.
- New Zealand has declared the country to be free of existing as well as new Covid-19 cases and was able to lift all lockdown restrictions this week. Among other things, this means that the country’s rugby players will be the first sportspeople to play in front of fans in a post-lockdown world.
- Tesla achieved the milestone of becoming the world’s most valuable carmaker this week by pushing Toyota into second place as Tesla’s stock rose to over $1000 per share.
- The Chinese company, Amperex Technology Co. Ltd. has said that it can produce a battery that has a life of 16 years and 2 million kilometres! This is a landmark in the motor industry, where the company currently makes electric-car batteries for Tesla and Volkswagen AG.
- The Competition Commission is renewing the ongoing pursuit against 28 local and foreign banks for rigging the rand-dollar exchange market for years, namely between 2007 and 2013. Among the accused are: Standard Bank, Investec, Absa, Investec Bank, FirstRand, Nedbank, and Rand Merchant Bank (RMB). Two traders have already admitted to currency manipulation. Follow this link for more on this unfolding saga.
- South Africa has long resisted loaning money from the International Monetary Fund but has recently caved with the economic calamity brought on by the Covid-19 pandemic. Now some factions of the ANC worry that the $4.2 billion loan marks the first step toward a slippery slope of submission.
- The investigation into the SARS rogue unit which implicates Pravin Gordhan has suffered a major setback. This week the High Court set aside an intelligence report which was at the core of Public Protector, Busisiwe Mkhwebane’s, case against Gordhan.
- The Constitutional Court has ruled that the Electoral Act is unconstitutional – this means that independent candidates will be able to run for national and provincial elections. In its current form, the Electoral Act restricts independent candidates to run for positions in municipal elections. This could be a game-changer for the 2021 local elections.
- Trauma wards have been filling up in South African hospitals since the nine-week ban on alcohol sales was lifted on the 1 June. There is mounting concern that these trauma cases will be competing with Covid-19 patients in need of urgent care.
- Follow this link for an article written by Stephen Grootes where he discusses possible reasons behind why Minister Nkosazana Dlamini Zuma and other Ministers have appeared to avoid public opportunities to properly explain government’s position on the tobacco ban.
- Sweden’s judiciary has named a man who they consider murdered Prime Minister Olof Palme in Stockholm in 1986. The prosecutor said “reasonable evidence” pointed to Stig Engstrom, a graphic designer, who took his own life in 2000 at the age of 66. The Swedish murder story had previously implicated South Africa through spy agent Craig Williamson, though there was insufficient evidence for this to be conclusive.
- Nespresso has increased the price of Nespresso capsules by R2 per capsule. The company has blamed rand weakness for the increase – the rand is down approximately 20% since the start of the year. We include this seemingly insignificant news, as Nestlé, the manufacturer of the capsules, is a core holding in our offshore portfolios, and its ability to pass cost increases to consumers illustrates the pricing power of these leading global brands.
Sources: Dynasty, Reuters, Bloomberg Markets, The New York Times, Daily Maverick, and Moneyweb, etc