Here are some words of encouragement as we approach winter solstice next week (21 June), after which the sun starts its hard slog back towards summer.
Britain won't leave Europe next week. At least, that's what bookmakers are still saying at this late hour, even as the “remain” lead keeps shrinking alarmingly. So all the precautionary sell-offs may have been for nothing, the anxieties shown by city folks about jobs lost and banks migrating can ease, and capital parked for safety sake in safe havens can return. Relax, it was all a bad hoax, not unlike Grexit three years ago. We hope.
Janet Yellen speaks tonight, after the Fed has released its latest dot-plot. It is true that US jobless claims (unemployment benefits) continue to primly trace out firm economic recovery, that the next US payroll in two weeks could revise away last month’s payroll dip, thereby resurrecting July as the month in which US rates are lifted, but markets generally price in a benign Fed further recalibrating with low-low market projections.
That should keep the Dollar weak, and risky assets elevated, thus extending the period of Rand firming for external reasons.
Then on 3 August, SA should register a seismic event as local elections lift the fortunes of EFF and DA, possibly giving them each one or more municipalities to experiment their many wiles on. In the case of DA chieftaincy, city inhabitants can look forward to better functioning municipal services, while in the case of EFF municipalities some quite revolutionary changes may be tried regarding property ownership and other forms of redistribution, favouring the poor (rather than the newly elected red-draped councillors?).
Far more interesting, frankly, is what the ANC will do with its slimmed down municipal majorities and cities under its control. There may well be a greater effort to get reform going, given a 1000 day head-start to elections 2019.
Besides promised absence of electricity blackouts (a safe bet by now, despite the lowest electricity output in seven years), the focus is on labour market reform. The secret strike ballot seems to be on, as is the payoff to unions of some kind of national minimum wage (with the bar not set so high as to instantly jumpstart higher joblessness among the poorest sections, feeding the EFF recruitment drives), and possibly a word in the ear of education unions.
Apparently it has sunk in that by grade 3 some 60% of youngsters are functional illiterate, destined for a bleak life on the outside of the patronage system, and presumably future EFF foot soldiers to boot. That has finally been recognised for what it is (not clever) and something may even be done about it.
Then by Christmas, SAA may have a new board, and after dropping her pilot be soaring high again (perhaps?). Other SOE shakeouts may be in the works, too, with the mining charter “once empowered, never enough” finally put to bed, if not quite to rest. This is the low-hanging fruit most desperately wanted by rating agencies to keep our grading stable for another 6-12 months, especially if by then the heavens were to open as scheduled and give us more normal summer rainfall and refilled dams currently depleting at an alarming rate.
The support for the Rand from all this could continue, food price inflation could ease remarkably, between them pulling headline inflation down from a 7.5% September peak in 2016 to nearer 5% by late 2017.
That kind of external (Fed, Rand) and internal (food) reality might cause SARB finally to go on hold with its progressive liftoff, even as Treasury stays on track to deliver budget deficits below 3% after 2017, with the current account deficit following eventually (imports having gone out of fashion while exports hold up).
The real prize we are all waiting for (presumably?) is a Trump presidency, inked by November. Not necessarily advantageous for some of our exporters (expect trade regimes to be unilaterally torn up), but possibly along other (torturous?) routes showering us with windfalls.
Trump might be good for $1 trill of US tax cuts. That should boost US growth, global growth, and the Dollar, keeping the Rand competitive through 2017. Also, he might increase US deficit spending by a $1 trill next year, boosting defence spending and infrastructure, giving a flip to our commodity exports & prices.
If insecurity in the world were to increase, entirely plausible when watching the ghastly nightly news, our precious metal fortunes could improve once again, too.
In this vain, there could be lots of good stuff to look forward to these next six months and beyond, as we connect the rubber with the road once more on our way to the next summer solstice.
But first, let's have some really good winter rains to fill up those empty dams and lower those growing anxieties of gardeners all round.

Cees Bruggemans
Bruggemans & Associates, Consulting Economists

Website  www.bruggemans.co.za
Email. economics@bruggemans.co.za
Twitter  @ceesbruggemans
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