Cryptos are finally recovering, what about another rally?
During the last few weeks, both investors and media have put aside cryptocurrencies to focus on traditional markets. This came quite naturally as equities suffered a substantial sell-off and volatility exploded. Meanwhile in the crypto market, it was the time of consolidation. Indeed, after a rocky start into the year, Bitcoin and its peers finally took a breather and stopped free-falling. In fact, the crypto market has even started to recover recently. After falling as low as $276 billion, the total market capitalisation bounced back to around $481bn this week as the price of Bitcoin crossed the $10,000 threshold to the upside.
We are definitely positive regarding the outlook for cryptocurrencies. This year will be key for this new asset class as several teams behind crypto projects are expected to deliver either beta version or final product. Even though we believe the positive momentum initiated a couple of weeks will continue, one may have to wait for the Chine New Year to end before seeing an acceleration. Now is therefore the good time to make the final adjustment to your portfolio before the next rally.
Don’t bet with the bears
The world’s largest hedge fund, Bridgewater, is reportedly shorting a selection of European blue chips to the tune of $18 billion. Should European equity investors be nervous?
No. The recent sell-off lacks the fundamentals of a sustained correction. The US Federal Reserve Bank’s monetary tightening and the consequent rise in US yields has been well telegraphed. Higher inflation, unless it goes parabolic, is unlikely to surprise traders. The age of innocence is over on Wall Street, traders will become more vigilant, but that doesn’t necessarily mean the end of the historic bull-run. The upcoming Purchasing Managers Index for February will prove the strength of Europe’s cyclical upswing.
Goodbye Zuma, hello growth
South Africa’s JSE 40 Index will expand more rapidly as President Jacob Zuma steps down, following a 9-year rule marked by corruption, pork-barrelling and incompetence. Successor President Cyril Ramaphosa, former African National Congress (ANC) party leader, is expected to drain the swamp, starting with an address to the nation today.
Investors are looking at a stronger rand (USD/ZAR at 11.58) along with higher equities: the JSE 40 reached 52’565 points (+4.27%), reinforced by Industrials (+10.44%), Consumer Discretionary (+8.01%), Financials (+6.69%) and Health Care (+6.59%). With December 2017 consumer prices up 4.7% annually, inflation is subdued. January 2018 Business Confidence increased to 99.7 from December’s 96.4 – its highest since 31 October 2015. December’s trade balance was ZAR 15.7 billion, suggesting a strong economic recovery.
