Brace for volatile festive season‚ economists warn

13 December 2015 - 16:58 By TMG Digital

Hold on to your hats. It’s going to be a volatile festive season‚ economists warn. FNB Economists‚ Alex Smith and Mamello Matikinca point out that the surprise redeployment of Finance Minister Nhlanhla Nene sent SA markets into a tailspin last week.These moves were exacerbated by the decision the week before by Fitch to downgrade SA’s sovereign credit rating to one notch above junk status (with a stable outlook).Meanwhile S&P opted to cut its outlook on SA to negative while leaving the rating at one notch above junk. This suggests that the door is open for S&P to cut SA to sub-investment grade status in 2016‚ the economists note.They add that little is known about the new Finance Minister David van Rooyen and his stance on fiscal policy. This will make the February 2016 budget crucial.“Meanwhile‚ we think there is a good chance that the Fed will lift US interest rates next week. If that does transpire‚ the Rand and SA bonds could come under further pressure‚” the FNB economists warn.“It will be a hugely important week for the global economy. That is because the US Fed is expected to announce an interest rate hike on Wednesday for the first time in nine years. There is a risk of significant financial market volatility before and after the announcement‚” they add.

This article is reserved for Sunday Times subscribers.

A subscription gives you full digital access to all Sunday Times content.

Already subscribed? Simply sign in below.

Registered on the BusinessLIVE, Business Day or Financial Mail websites? Sign in with the same details.

Questions or problems? Email or call 0860 52 52 00.