The shock GDP contraction for 1Q19 brings home the stark reality of how badly managed our economy has been over the last decade.
The chart below shows 4 years of GDP growth where South Africa grew 2%, the G7 grew just under 8%, the 42 OECD countries as a whole grew 8.7%, Emerging markets grew 10.5% and the BRICS countries (of which SA is a part) grew just over 11%. It’s a stunning, consistent, shocking, inexcusable under-performance. In fact over the last 4 quarters (1 year) SA is the 4th slowest growing economy tracked by the OECD in the world:
The future 3-6 month economic outlook remains depressed as shown by the Composite Leading Business Cycle Indicator below:
The future outlook for the JSE is not that bright either, at least according to a battery of indicators that reliably predict future JSE returns:
It’s not nice being the bearer of bad news but right now there is nothing positive to say about the current local economy, nor prospects for future economic or JSE outcomes. This is one of those times that we just need to sit it out until the indicators start improving, or look outside of SA for positive equity outcomes or turn to high yielding fixed interest products until prospects become better.
This is not to say positive local equity outcomes are impossible, it merely says the odds are stacked heavily against them and they are most likely improbable. Your risks are high and its good to know your risks when dabbling in the stock market.
Dwaine van Vuuren
RecessionAlert, Sharenet Analytics
Dwaine van Vuuren is a full-time trader, global investor and stock-market researcher. His passion for numbers and keen research & analytic ability has helped grow RecessionALERT.com (US based) and Sharenet Analytics (SA based) into subscription services used by thousands of hedge funds, brokerage firms, financial advisers and private investors around the world. An enthusiastic educator, he will have you trading and investing with confidence & discipline.