It seems that the 2020 whirlwind is showing no signs of easing, as October proved to be another rollercoaster month. Many countries went back into lockdown, United States (US) citizens were getting ready to vote (while the rest of the world held their breath), the United Kingdom (UK) moved closer to a ‘hard Brexit’ as Prime Minister Boris Johnson is yet to conclude a favourable deal, and Europe is facing increasing recession risks. 

Markets fell on the back of these developments and uncertainties as well as disappointing earnings reports from some of the large tech shares (which have been market darlings for this year thus far). Significant drawdowns were experienced in the US, UK and Europe (especially Germany and France), despite strong gross domestic product (GDP) growth rebounds published for the third quarter. Asian markets performed slightly better, with Japan being down less than 1% and China rising slightly.

The local market also had another tough month, with equities, property and the average offshore flexible portfolio all losing significant ground. Contributing to the negative returns from offshore investments was the currency effect from the Rand that strengthened throughout the month by around 3% against the US Dollar. Bonds also had a slightly positive month, supported by stable inflation figures for September and attractive real yields.


At the time of writing, the final US election results were being tallied and the outcome was still too early to call. While the two candidates clearly do not see eye to eye, and there are significant differences in their approaches to the presidency, there are also some similarities that can be drawn between their preferences and policies. These include support of accommodative monetary (and, to some extent, fiscal) policy and increased capital expenditure, preference for a weaker US Dollar, and a
tougher stance towards China, albeit that Joe Biden will do this in a much more diplomatic manner.

Either way, with the potential for a contested election, a divided house and the uncertainty of whether markets would prefer a
change in the status quo or not, it is best not to bet the house as volatility and market noise will likely persist.


  • Finance Minister Tito Mboweni presented the MTBPS towards the end of October. The MTBPS painted a worsening picture of
    government finances but again coupled with some optimistic plans. Key highlights include:
  • Tax increases have generated less revenue than expected (thus becoming less effective). An increase in personal income
    tax is still likely and potentially even another value-added tax (VAT) rate increase.
  • Cost cutting will occur at a slower rate than expected. The economy cannot afford an excessively sharp fiscal
  • There is a focus on shifting from consumption to capital expenditure spending (borrow for capital assets rather than to
    consume), again reflecting the need to cut government’s wage bill. A wage freeze has been proposed for the next three
  • Treasury expects zero-based budgeting to be implemented by 2023.
  • Weakened state-owned enterprise (SOE) balance sheets continue to put the budget at risk, with an additional R10.5 billion
    allocated to South African Airways (SAA).
  • There seems to be a growing focus on electricity generation, Eskom and splitting the SOE into three proposed divisions.
  • Prescribed assets remain an unlikely funding method.