Is there light at the end of the tunnel?

This year started off in the same downward trend as we experienced over the last 6 months of 2008. March, however, bucked this trend and the JSE so far has had a positive 11.9% return for the month.

The JSE All Share Index shot up from 18,000 to 21,400 (+19%) and has now dropped back to 20,000 or so.  At 20,000 it is still 10% higher than where it was three weeks ago. In this sort of market, where uncertainty remains elevated, it is not surprising to see huge volatility and profit-taking after a big jump like we’ve just witnessed.

US Investment bank, Morgan Stanley, is recommending selling US shares after the S&P 500 Index rose by 21% in the past two weeks, the most since 1938. They are concerned that company earnings reports for the first quarter, due in the next two weeks, will be bleak, putting a  lid on any further stock market advances.  Analysts are expecting US company earnings to decline by 36% on average from Q1 in 2008.

Jeremy Gardiner, a director at Investec Asset Management, comments on what he thinks the future holds:
Most people have accepted that 2009 is going to be a tough year. We all know that "this too will pass". The big question however is when, so let's try and put some timing to it.

The first key point is that not all countries will recover simultaneously. It is all about your ability to stimulate (stimulate is the new "bailout", as it has a more
 
positive association with the tax-paying public). So those governments with high savings and low debt rates are sitting pretty. If your country's consumers have also not borrowed that much, you are in an even better position.
 
Of course, those countries with high government debt and highly leveraged consumers can also stimulate, but they will have to print the money, which will affect their currency later. The United States is in this position.

Expect emerging markets to improve before the developed world, but not all at the same time. Asia, with high savings and low borrowings (both government and consumers) will emerge first. Obviously, China is key here. Next to emerge will be Latin America. Brazil will probably grow 1.5% this year, Mexico due to its reliance on the US will probably see a recession, and Argentina may default. Europe is in bad shape due to infighting amongst the Euro zone, banking problems and over indebtedness (80% of Turkey's foreign reserves this year will be spent servicing their debt).

In summary
So, is there light at the end of the tunnel? While the stock market turmoil of September/October 2008 has subsided to some extent, we can expect the markets to continue to be volatile for the short to medium term. Once the global recovery starts taking place, South Africa is in a very good position to take advantage of this recovery.