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In this week's bottom line - 26 October 2021

Colin Powell, former US secretary of state, passed away on Monday last week. He was known as a leader par excellence. We look at Powell’s thirteen leadership rules.

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south african markets
Contributed by Werner Erasmus

The inflation rate, as measured by the consumer price index (CPI), accelerated for a second consecutive month to 5% in September from 4.9% in the previous month. The latest reading is above the South African Reserve Bank (SARB) midpoint target of 4.5%. September’s increase to 5% year-on-year was driven by increases in fuel, food and housing and utilities. This comes as rising energy prices and supply-chain bottlenecks stoke global inflation fears and developed market central banks make more noise about tightening monetary policy sooner rather than later. On a monthly basis, consumer prices ticked up 0.2%, slowing from a 0.4% gain in the prior month. The noticeable influence of food and energy inflation is further illustrated when considering core inflation. Core, which is headline CPI excluding food and non-alcoholic beverages, fuel and energy, measured a significantly more subdued 3.2% year-on-year in September, marginally up from 3.1% in August. Looking ahead, fuel and electricity inflation present the greatest source of upward inflationary risk as they spill over to the cost of producing and distributing goods as well as providing services. Furthermore, services inflation is expected to also pick up from the current low level. However, this will depend on the speed of vaccinations, improvements in the labour market, market concentration following business closures and consumer confidence – which would determine supplier pricing power and the ability to pass more of the input cost pressures to consumers. With inflation risks mounting, economists expect the Reserve Bank’s monetary policy committee (MPC) to change to a more hawkish tone, although opinions are split over whether the SARB will raise the repo rate by 25 basis points at the next MPC meeting in November, from the current record low of 3.5%.

south african markets
Contributed by Ingrid Breed

Composite Leading Business Cycle Indicator, due Tuesday 26 October. The SARB’s composite leading business cycle indicator, which provides an insight into expected future economic and business conditions, is forecast to have decreased by 2.2% in October, although an improvement from September’s 2.5% decline.

Producer Price Index, due Thursday 28 October. Producer price inflation is expected to have edged up slightly to 7.3% year-on-year and 0.7% month-on-month in September from 7.2% and 0.8% in August. Producer inflation is being pressured in the food and transport categories, in response to global supply chain issues.

Private Sector Credit Extension, due Friday 29 October. The credit extended by the SARB to domestic borrowers, is likely to have improved from the 1.12% growth recorded in August, with estimates ranging from 1.4% to 2.1%. Household credit should increase with an easing of Covid-19 restrictions. Corporate credit demand, however, is being held back by subdued business confidence levels.

Trade Balance, due Friday 29 October. The balance of trade, which is the difference between the value of a country’s exports and the value of its imports, is anticipated to have recorded another surplus in September, with economists’ estimates ranging from R35 billion to R48 billion. The trade balance is benefiting from continuing strength in global demand and the clearing of backlogs caused by July’s disruption.

Total New Vehicle Sales, due Monday 1 November. New vehicle sales are forecast to have edged up slightly in October to around 44 000 units from 43 130 recorded in September. Despite the global semiconductor chip shortage, the National Association of Automobile Manufacturers of South Africa (NAAMSA) announced that it did not hamper South Africa’s capacity and ability to produce vehicles. Instead, NAAMSA blamed Covid-19’s disruptive elements, higher logistics costs, and supply chain disruptions.

global trade
Contributed by Nick Downing

Commodity prices are booming. The S&P GSCI composite commodity index has almost doubled over the past 12 months, powered by increases across oil, metals and agricultural commodities. The price gains are attributed to the reopening of economies and pent-up demand, fuelled further by massive fiscal stimulus. Investors are also drawn to commodities due to their natural hedge against rising inflation risks and to their hedge against the potential for US dollar weakness. Copper has captured the attention of the investment community over the past week after breaking above its previous all-time high recorded in 2011 during the commodity “super-cycle”, which was led by China’s rapid industrialisation. While copper and other metal prices are showing the characteristics of another super-cycle, most economists are sceptical as China is transforming from an investment-led to a consumer-led economy. However, other economies are taking up the baton helped by extravagant infrastructure spending plans and the race towards a net zero carbon footprint within the next 30 years. The mass adoption of renewable energy and electric vehicles will lead to a step change in demand for copper and other key “green” metals. Meanwhile, the hangover from the last super-cycle means mining companies have been reluctant to develop new capacity. Due to the extended period taken to develop new mines, the existing supply constraints may last several years and potentially squeeze commodity prices even higher. Ivan Glasenburg, CEO of Glencore said the copper price needs to rise another 50% from current levels to unleash the new capacity required to meet burgeoning demand forecasts.


north america
Contributed by Nick Downing

Federal Reserve Chairman Jerome Powell said last week that “The risks are clearly now to longer and more persistent bottlenecks, and thus to higher inflation.” A number of Fed policy members have voiced concerns that business and consumer inflation expectations may become “un-anchored.” If consumer price inflation, currently running at 5.4% fails to subside by early next year, some policy makers feel the Fed will need to raise interest rates sooner than previously anticipated. The futures market is pricing-in a 75% probability that there will be two 25 basis point rate hikes in 2022, up from a 20% probability a month ago. The increased rate expectation has not dimmed the market’s long-term inflation forecasts. The breakeven rate between conventional Treasury bonds and Treasury Inflation Protected Securities (TIPS), which measures the market’s expected annual inflation rate over the bond maturity, has risen sharply over the past month. The 10-year breakeven has increased from 2.35% to 2.63% over the period. Fed policy makers cite rising energy prices, a broadening in inflationary pressures beyond those originally affected by lockdowns, such as rent, and the potential inflationary effect of further fiscal stimulus, currently passing through Congress. The upcoming Fed policy meeting on 2-3rd November will be closely watched for any change in the official line that inflationary pressures are “transitory”.

Economic data point to a reacceleration in economic activity at the start of the fourth quarter (Q4). Following annualised GDP growth of 6.7% in Q2, GDP is projected to have slowed to 3% in Q3, due to a resurgence in Covid infections, but the latest surveys signal a move back to around 5% growth in Q4. Business activity, measured by the IHS Markit Composite purchasing managers’ index (PMI), which covers both manufacturing and services sectors of the economy, increased in October from 55.0 to 57.3, a three-month-high. While the manufacturing PMI slipped from 60.7 to 59.2 due to supply chain disruptions, the services PMI, which comprises over two-thirds of the US economy, surged higher from 54.9 to 58.2, well above the consensus forecast of 55.1. While pointing to a significant boost in activity, the survey also revealed rising inflationary pressure. Chris Williamson, chief business economist at IHS Markit reported that “While the economy looks set for stronger growth in the fourth quarter, the upward rise in inflationary pressure shows no sign of abating.” The Federal Reserve Beige Book, an anecdotal summary of business conditions across the country, published 8 times a year, comes to the same conclusion. According to the Beige Book published on 20th October, many businesses expect supply shortages and inflationary pressures to last another year. Sustained higher prices, as well as forcing quicker interest rate hikes from the Fed could also derail consumer spending and corporate earnings growth.

Contributed by Nick Downing

Beijing took a significant step in arresting the recent slowdown in economic growth momentum. Troubled by an energy crisis, stemming from China’s race to achieve carbon neutrality by 2060 and subsequent restrictions on coal fired power, authorities took the decision to lift caps on electricity tariffs. Previous attempts at cajoling power stations to operate at full capacity were ineffectual as they were operating at a loss due to electricity tariffs. The relaxation of electricity tariffs should be a game changer for the economy, helping to restore industrial activity back to full capacity and ending the impact of power outages on consumer activity. The tariff cap on high energy users was removed altogether and for other users, the cap was lifted by 20%. The government’s decision gives a clear signal that notwithstanding efforts to rebalance the economy, preserving solid GDP growth remains the core priority. Although good for China’s economy, there are implications for global inflation. Exporters are likely to pass on the tariff increases to their end customers, placing even more inflationary pressure on global supply chains.

New home prices suffered their first nationwide decline since March 2015. The National Bureau of Statistics average new home price across 70 major cities dropped in September by 0.08% month-on-month, reducing the year-on-year price gain from 3.70% to 3.26%. The government is keeping up the pressure on property developers to deleverage but will want to avoid the home price decline from accelerating. Homes and property investments account for an estimated 80% of household wealth. The fragile state of the real estate market will test government’s resolve in deflating excessive debt among developers. On past occasions, the government has relented and come to the rescue of the property sector, which historically has accounted for a third of China’s GDP. However, Beijing appears to be resolute, with President Xi Jinping wanting to press ahead with the unpopular property tax. Some fear that the property tax, aimed at quelling property speculation, could be the final nail in the coffin for the all-important real estate sector and property development, potentially sparking a housing crash. In favour of the property tax, local governments which traditionally depend on development land sales for much of their revenue, could instead turn to the property tax for the equivalent revenue. The government appears determined to press ahead with rebalancing the economy. A bright spot is that households will look towards competing assets for investment purposes. The equity market is the main competing asset class to property and would flourish if the outlook for property returns diminishes.

japanese markets
Contributed by Carel la Cock

Japan’s private sector business activity arrested the decline recorded in September, aided by the much larger services sector registering its first rise since January 2020. The Jibun Bank Flash Japan Services Business Activity Index improved from 47.8 in September to 50.7 in October, edging above the 50-level indicating an expansion. New business inflows had the softest decline in six months, while staffing levels were largely unchanged in the month. Stronger positive sentiment for business activity in the next twelve months was supported by a belief that the pandemic will soon end, boosting demand across the economy. Manufacturing expanded during October driven by a recovery in output and new orders which saw a decline in September. The latest Jibun Bank Flash Japan Manufacturing Purchasing Manager’s Index (PMI) reading of 53.0 for October rose 1.5 points from the final reading in September. Input price pressures continued during October rising at the fastest rate in more than 13 years with many respondents highlighting supply chain issues and shortage in raw materials as significant headwinds. Output charges increased as a result, at the fastest pace since mid-2018. Optimism for the year ahead remained resilient and encouraged employers to increase staff levels for a seventh consecutive month and at the fastest rate since April 2019.

euro european markets
Contributed by Carel la Cock

Private sector business activity in Europe lost momentum at the start of the fourth quarter as continued supply chain problems throttled the manufacturing sector and service sector input costs hit a two-decade high. The IHS Markit Flash Eurozone Composite PMI fell to a six-month low of 54.3 in October, down from 56.2 in September. Service sector activity also recorded a six-month low and although the sector expanded and outperformed manufacturing, its loss in overall momentum was more pronounced than that of manufacturing. Germany reported a weaker expansion in services and the fastest increase in operating expenses since records began. In contrast, France and the rest of the region saw an uptick in service activity. Manufacturing continues to be plagued by persistent supply chain issues, causing lengthening delivery times, order backlogs, port congestion and record increases in manufacturing costs. Manufacturing output fell to a 16-month low, impacted by a near stalling in car manufacturing in Germany while France reported a drop-off in new orders as severe delays have led to many customers cancelling orders. Both sectors increased staff levels to clear backlogs leading to the fastest job growth numbers in 21 years for the region. Selling prices also advanced at the fastest pace for two decades adding to inflationary pressures in the eurozone. The figures will be closely watched by the European Central Bank (ECB) which will meet next week. The ECB has thus far maintained that inflation is transitory, but as supply chain issues persist and with no clear evidence that they will subside in coming months, a change in outlook is warranted. Analysts at Morgan Stanley expect the eurozone’s economic growth to slow to 1.3% in the final quarter of the year with significant downside risk, compared to the 2.1% and 2% growth rates achieved in the previous two quarters.

uk markets
Contributed by Carel la Cock

UK private sector output growth has recovered to a 3-month high following a slump in August and September. The IHS Markit/CIPS Flash UK Composite Output Index at 56.8 rose markedly from the final figure of 54.9 in September. The rise in output was driven by the much larger services sector which comprises nearly 80% of the UK economy, while output growth in manufacturing slowed to an 8-month low. The latest figures point to an uptick in momentum despite worsening supply and staff shortages in manufacturing. Backlogs of work increased for an eighth consecutive month while shortages in staff and raw materials persisted at record levels. New business volumes increased at a solid pace marking a 3-month high. Private sector job creation grew at close to record levels, in response to strong demand, rising backlogs and optimism about business conditions in the year ahead. Input price inflation rose to record levels as higher wages, worsening supply shortages and rising energy bills started to bite, while output charges kept pace and marked the steepest rise since records began. Duncan Brock, Group Director at CIPS, warns “A chill has appeared in the post-lockdown economic landscape with so many obstacles still to be navigated. As businesses run down their inventories to meet current demand, there may be slim pickings in the month ahead to keep business rolling.”

Contributed by Carel La Cock

Asian countries are seeing a broad-based economic expansion according to the latest IHS Markit Asia Sector PMI figures. Of the 18 sectors being tracked, no less than 16 increased output in April and 13 indicated higher employment levels. Automobiles and Auto parts saw the quickest growth and maintained the momentum gathered in the last three quarters. Other manufacturing sectors such as chemicals, technology equipment, machinery and equipment and household and personal use chemicals all showed promising growth, outpacing the gains made in March. The April reading of the IHS Markit ASEAN Manufacturing PMI figures also showed a steep rise in output and new orders. Vietnam reported the best growth of the ASEAN nations with their PMI hitting a two and a half year high followed by Indonesia which hit a record high. Business confidence across the region was the strongest in over a year. Service sectors also improved especially in healthcare, transportation, and industrial services, but their recovery is still lagging manufacturing. As the global economy continues to gather pace, the region is well placed to benefit from higher global demand and trade.

Y to D %
Market Indicators

JSE All Share

JSE Fini 15 

JSE Indi 25

JSE Resi 20




S&P 500


Hang Seng


FTSE 100



Brent oil

Y to D %

+ 12.75

+ 15.26

+ 10.18

+ 10.21

+ 0.04

– 5.26

+ 0.70

+ 21.58

+ 6.16

– 4.41

+ 4.03

+ 11.80

– 5.05

– 1.74

+ 66.41



















Contributed by Gielie Fourie

Colin Powell passed away on Monday last week at the age of 84 of complications from Covid-19. He was an American politician, diplomat, statesman, and four-star general. He was the first African-American secretary of state, serving under Republican President George W. Bush. Powell’s experience in military matters made him a very popular figure with both American political parties. Many Democrats admired his moderate stance on military matters, while many Republicans saw him as a great asset. He supported the Republican Party. He was honoured with more than 60 awards and decorations.

Several books were written on Powell. He was a prolific author and wrote 21 books. He will be remembered for his leadership qualities. In his 2012 memoir, “It Worked for Me: In Life and Leadership”, Powell drew on personal collections of lessons and anecdotes to share the wisdom of a lifetime in service to the nation. The book itself is a terrific read. In the book he shares his thirteen “Rules of Leadership”. Powell’s rules are actually lessons themselves, gleaned from his decades in uniform. The genius is in their simplicity; the power is in their brevity. He doesn’t waste a lot of words. Below are Powel’s “Thirteen Rules of Leadership”. They apply as much in business and life, as they do in the military. Here is Powell in his own words.

Rule No.1. “It ain’t as bad as you think – It will look better in the morning: There’s a silver lining in every cloud, you just have to find it. That’s not always as easy as it sounds. Things might look bad today, but if you’ve put in the effort, tomorrow will be a brighter day. It’s a state of mind; believe it and you will make it happen.” Rule No. 2. “Get mad, then get over it: There’s always going to be days when events, or people, push you to the edge. When you do lose your temper, don’t lose control at the same time. People always remember the leader with a bad temper, and never in a good way.”

Rule No. 3. “Avoid having your ego so close to your position that when your position falls, your ego goes with it: People who think that their way is the only way tend to experience a lot of disappointment. Things aren’t always going to go your way, that’s just a fact of life. Be humble enough to accept that fact.” Rule No 4. “It can be done! Just about anything can be accomplished if you set your mind to it, have the necessary resources, and the time to get it done. Don’t succumb to the skeptics; listen to what they have to say and consider their perspective but stay focused and positive.”

Rule No. 5. “Be careful what you choose: Don’t rush into a bad decision. Take the time to consider your options, weigh the relevant facts, and make reasoned assumptions. Once you pull the trigger, there are no do-overs. So, make it count.” Rule No. 6. “Don’t let adverse facts stand in the way of a good decision: Be a leader who hones judgement and instinct. Take the time to shape your mental models. Learn how to read a situation for yourself. Become the decision-maker your people need you to be.”

Rule No. 7. “You can’t make someone else’s choices: Never allow someone else to make your decisions for you. Ultimately, you’re responsible for your own decisions. Don’t duck that responsibility and don’t succumb to external pressures. Make your own decisions and live with them.” Rule No. 8. “Check small things: Success is built on a lot of seemingly minor details. Having a feel for those “little things” is essential. Leaders must have ways to check the little things without getting lost in them.”

Rule No 9. “Share credit: Success relies on the effort of the entire team, not just the leader. Recognition motivates people in ways that are immeasurable. Don’t be a glory hog. Share credit where credit is due and allow your people to stand in the spotlight. It ain’t about you. It’s about them.” Rule No. 10. “Remain calm. Be kind: Keep calm and carry on. Kill ‘em with kindness. When chaos reigns, a calm head and a kind word go a long way. When everyone is under incredible stress, be the leader people want to follow, not the leader people want to avoid.”

Rule No 11. “Have a vision. Be demanding: Followers need two things from leaders – a purpose and a firm set of standards. When you see leaders fail, it is almost always for one of those two things. They either lead their followers in a flailing pursuit of nothing, or they don’t set and enforce an example for their people.” Rule No. 12. “Don’t take counsel of your fears or naysayers: Fear can be a powerful motivator, but it can also paralise a leader at the worst possible time. Learn to understand your fears and channel them in ways that you control rather than allowing them to control you. Think clearly, think rationally, and make decisions that aren’t rooted in emotion.” Rule No. 13. “Perpetual optimism is a force multiplier: Optimism is infectious. Maintaining a positive attitude and an air of confidence is as important for you as it is for those around you. People will feed off your optimism. Believe in your purpose, believe in yourself, and believe in your people. And they’ll believe in you.” RIP Colin Powell.

*All writers’ opinions are their own and do not constitute investment recommendations or financial advice. Speaking to a qualified wealth and investment professional is crucial before making financial decisions.

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