Newsletter – Week 16 2024 – Is the US market topping out?

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Market watch:

Markets around the world have come off the boil somewhat in the last 10 days or so. While it is much too early to determine if there are any trends, the volatility is going to create some angst amongst investors. In the last 3 months the JSE appears to have performed better than Wall Street, but much of this is just a statistical anomaly. (Cobie gives us detailed insight into market volatility in his focus piece later).  


Mortgage rates in the US are on the rise again, back at the levels last seen in November last year. The 30-year mortgages are now at 7.1%. This is a doubling of rates from 3 years ago. (the RSA rate is currently at 11.75% – imagine if they went up to 20% – readers who were around in the 80s and 90s don’t have to imagine, I’m sure they remember those days very clearly).

This is going to impact the housing market, especially with first time buyers and middle class home owners who may be wanting to move. In commercial real estate in the US, there is a feeling that the real estate market has reached the bottom – and it isn’t pretty with a 35% decline in office prices and a 20% decline in commercial real estate overall. 


Bitcoin’s latest “halving” — the fourth in the cryptocurrency’s history — is now complete. And, there doesn’t seem to be much of a reaction because much of the price rise had already occurred earlier in the year. Bitcoin was trading at north of $63,000 roughly 30 minutes after the halving, which officially took place following the mining of the 840,000th block in the Bitcoin blockchain..

But what is the halving, and why is it important? The fourth halving is especially notable since roughly 95% of all bitcoins that will ever be in circulation have already been mined. Fortunately, while the reward miners receive for successfully completing a block has dropped to 3.125 from 6.25 bitcoins, they continue to receive additional income from transaction fees. Bitcoins are divisible into smaller units, with the smallest being a “Satoshi,” or one-hundred-millionth of a bitcoin.

Time in the market

The seemingly never-ending US bull market has underlined the importance of following the homily – it’s not the timing of the market – it’s the time in the market.

Even if stock prices have generally gone up over time in the past, there have certainly been long stretches when prices go down or sideways. Any investor who rides these periods out fully invested, hoping “asset allocation” will save them in the end, risks going years or even decades with little to no progress in his or her capital. You can see this in the graph below. 

For example, investors in 1929 — the year of one of the most famous crashes in Wall Street history — would have likely taken little comfort in knowing the Dow Jones Industrial Average didn’t return to its pre-crash high until 1955.  A poorly timed stock purchase in 1966 would have meant around 16 years of no gains until 1982. And even though the Dow briefly broke out to new highs in 2006/2007 above the previous 2000 peak, it was short-lived and really it wasn’t until 2013 that it got going again.

Considering a disproportionate amount of the wealth is now held by older Baby Boomers with fewer years to recover losses, many investors probably cannot stand to sit through a decade-plus of no gains should it happen again. Analysts are expecting Boomers and retirees to take more advantage of long term high treasuries that are available at the moment. 

China is fighting back

The Cyberspace Administration of China asked Apple last week to remove Meta Platforms’ WhatsApp and Threads from its App Store in China due to national security concerns. Signal and Telegram—two foreign messaging apps—were also removed from the Chinese App Store. The removal of the four apps comes as elites in Washington, DC, attempt to ban Chinese app TikTok from US phones. 

For the 9th month of the last 11, China’s Treasury holdings of US Treasuries declined in February (the latest TIC data), dropping by $22.7BN. Additionally, it has now been 24 of the last 28 months that China’s Treasury holdings have declined, now back at practically its lowest level since June 2009…

‘Correlation is not causation’, but one would find it hard to argue that the practically perfect concomitance of China’s Treasury holdings and the yield of the US 10Y Treasury note over the past three years makes us wonder – away from The QT, The FedSpeak, the macro-economy, the geopolitical crises, the AI-hype, the growth scares (all of which will be impacting the Bond rate)  – is there not perhaps a  well-managed (slow and steady) liquidation of China’s (still massive) US Treasury holdings…

We know that there are some massive roll-over and maturities of US bonds on the horizon, and the demand for treasuries has been muted – perhaps this is one of the reasons why? Interestingly, just as Treasures are being dumped, China, Russia and other countries have been building up their gold reserves (signaling the move away from the US dollar as a reserve currency.)


India is one of the countries that has voting this year and there are nearly 1 billion voters! The vote this year pits Modi’s Bharatiya Janata Party (BJP) against an alliance of two dozen opposition parties that promise greater affirmative action (this is promotion of lower castes who have been discriminated against for centuries).

This voting is obviously a massive exercise and is done in phases, running through to early June. Opinion polls have suggested the BJP will easily win a majority, even though voters worry about unemployment, inflation and rural distress in the world’s most populous country and fastest growing major economy.

The Muslim/Hindu tensions are growing. Hindu nationalism is a key election theme, especially after Modi’s consecration of a grand temple to Lord Ram in January 2024 on a site in Uttar Pradesh believed to be his birthplace, more than three decades after a Hindu mob destroyed a 16th-century mosque that had stood there, leading to nationwide religious riots. In 2019, the Supreme Court handed over the land to Hindus and ordered allotment of a separate plot to Muslims to build a new mosque. Critics accuse Modi’s government and party of treating India’s 200 million minority Muslims unfairly to please their hardline Hindu base – an accusation that both deny.

Modi is hoping for a 2/3rds majority that will allow him to make constitutional changes (sound familiar South Africans?) The opposition in India is weak and fragmented. Interestingly only 29% of the workforce is female in India – so there is a massive potential pool of additional workers. This is going to be a huge undertaking. India has made no secret of the fact that they are open for business that is moving out of China, but they are going to have to loosen up on the red-tape and bureaucracy around starting a business in India.


Bad news for chocoholics 

Cocoa hyperinflation is out of control. The latest data from the futures market shows that cocoa prices in New York surged above the $12,000 per ton level today as the pace of processing in factories remains robust.

This indicates that demand destruction has yet to emerge despite the massive multi-month parabolic price surge. (Chocoholics want their fix – at any price).

Cocoa futures are now at record high of $12,125. Prices are up more than 190% year-to-date and are in breakout territory. Most of this is a result of yet another poor harvest out of West Africa. It’s going to be interesting to watch at what price demand destruction starts to appear. 


Volatile Equities

Last week was an eventful week with markets remaining volatile after the FED indicated that they see rates higher for longer and Israel retaliating after the Iran attacks. There are lots of moving parts in markets at present but probably the most talked about factor is the fact that equities have dipped in performance as good news dries up. So is this normal for a market

I think most people would prefer an equity market that goes up linearly, much like the money market does but the reality is that this doesn’t happen. Equities are inherently volatile as they are attempting to price in a future landscape and how that will affect its revenues and ultimately profits. If new information today is negative for the future, this will lead to equities falling in value and visa versa.

This inherent volatility in equities will drive the overall returns of any portfolio to a greater or lesser extent depending on the equity weighting in the portfolio.

Remember you need equities in any portfolio to ensure that you can keep up with inflation. Why is this the case? Because equities have to grow beyond the cost of capital otherwise it will lead to their demise. It is this volatility which can send equities into a tailspin for extended periods drawing down portfolio values. But ultimately equities recover as the underlying companies find alternative ways out of an economic quandary or markets simply recover as bad news turns to good news again. 

Last week is a good point in case where for the month large cap global equities have retreated in value and any long-term investor should be asking what is offering decent value? In some cases, values have dropped by as much as 10%. This will lead to portfolio values reducing and will have some questioning if they should be invested in equities? 

By switching off equities in any portfolio, you are ignoring the only asset class where you can be part of the future. If you’ve read about the transformative power of Artificial Intelligence (AI) and wondered how this can change the world, you can today invest in some of the most exciting ideas in this space. Ultimately the future will lead and solve much of the economic problems we have today. Why am I sure about this? Because companies go through a creative destructive process daily where they attempt to outwit, outsmart and create a product set which can ensure market share and ultimately profits. It requires us as investors to not only look to the future but also to be optimists. The future belongs to optimists .. those that can see a solution rather than a problem. That ultimately is at the heart of each company. I find it amazing that these ideas are right on our market’s doorstep… we just need to be willing to participate. So back to my original question.. is this normal for equities? Yes absolutely! If you’re a pessimist it will give you a chance to fret but if you’re an optimist it brings opportunity.. which are you?   

Author- Cobie Legrange


The dollar was stronger again last week at 106.12. 

The DXY Index:

The Rand/Dollar closed weaker R19.09 (R18.68, R18.99, R18.76, R18.72, R19.15, R19.30, R18.97, R19.03, R18.80,  R18.78, R19.03). This is probably due to to the Dollar strengthening again over the week.

The Rand/Pound is stable at R23.62 (R23.61, R23.93, R23.90, R24.06, R24.18, R24.47, R23.61, R24.03, R23.87, R23.86, R24.15.)

The Rand/Euro closed the week a little softer at R20.35 (R20.25, R20.56, R20.43, R20.47, R20.71, R20.93 R20.38, R20.51, R20.38, R20.40, R20.72.)

Brent Crude: Brent closed the week slightly down at  $87.39 ($90.87, $86.58, $85.33, $81.80, $83.80, $83.40,$83.14 $80.91, $77.36, $83.66, $78.33).

Bitcoin was down a touch at $64,135 ($68,804, $64,681, $69,078, $68,340, $62,315, $54,649, $52,510, $47,195, $ 42,897, $41,608, $41,680).

Articles and Blogs: 
Why do I need a financial advisor ? NEW
Costs Fees and Commissions
The NHI and what do do about it 
New-Normal for Retirement? 
Locking-In Interest rates – The inflation story
Situs – The Myths and Reality
Tax Residency – New Rules new headaches Are retirement annuities dead 
A new look at retirement
Offshore investing – an unpopular opinion

Cobie Legrange and Dawn Ridler, 
Rexsolom Invest, Licensed FSP 45521.