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Monthly financial markets outlook | June 2024

May was eventful but closed on a positive note. Domestic equities, as well as offshore bonds and equities, generated healthy returns for investors. Domestic equities could have performed even better without the month-end sell-off, likely triggered by election uncertainty. The most significant event in the domestic space was the general election, in which the African National Congress (ANC) failed to secure a majority in parliament for the first time since independence. The ANC garnered 40.18% of the national vote, followed by the Democratic Alliance (DA) at 21.81%.The surprise came from the newly formed uMkhonto weSizwe Party (MK), led by the former president, Jacob Zuma. Exceeding expectations, MK captured a significant 14.58% of the votes, the highest for a new political party in South Africa’s democratic history. This strong showing relegated the Economic Freedom Fighters (EFF) to a distant fourth with only 9.52% of the vote. At the provincial level, the DA retained the Western Cape, while the ANC retained the Eastern Cape, Free State, Mpumalanga, and Limpopo. Gauteng, KwaZulu-Natal, and the Northern Cape are hung.

On the global front, sentiment was bolstered by a well-balanced picture of inflation and economic data. The disinflation trend re-emerged, with both the US and UK experiencing declines in inflation figures following previous spikes. Economic data landed in a sweet spot, neither too hot nor too cold. There were no major changes in monetary policy settings as most central banks maintained interest rates. The ECB signalled a potential rate cut in the coming months.

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