EasyResearch April 2023 market wrap-up

April is a wrap 📢; the Federal Reserve Bank recently announced a 25 basis point hike. Other countries, including South Africa, will also be announcing their interest rates.

In this EasyResearch market wrap-up, Divan Van Der Merwe, Business Analyst at Purple Group, shares some key market insights and why he believes ETFs might be a good investment choice while waiting out current global uncertainty.

April was another "wait and see" month following the massive moves in January and February of this year. That being said, it was a positive month nonetheless, and we'll take each positive month with a smile, knowing how bad it can get looking back at 2020.

Internationally 

The Dow Jones Industrial Average showed a healthy gain of 2.6%, with the S&P 500 close behind with a 1.6% gain. The NASDAQ, on the other hand, eked out a much less impressive 0.1% gain. This shows us that the tech sector is struggling to rebound from its so-called crash. Since tech companies are sensitive to higher interest rates, we expect a continued struggle throughout the Fed's anti-inflation campaign. With the 10th consecutive interest rate hike, this campaign is showing no signs of slowing down.

The Russell 2000 dropped 1.8%, showing that the market is not ready to run with the small-cap stocks. This, along with the Emerging Markets dropping 1.1% compared to a 2.9% gain in Developed Markets, indicates that the market is still sceptical of the current global economic situation and would much instead stick to safer plays.

Locally 

The month was surprisingly good, with the All-Share gaining 2.8%. This number is even more surprising given South Africa's dreaded electricity woes and other emerging markets dropping 1.1%. So, what makes South Africa so special? The answer is not as exciting as you might think. The reason for the surprise gain is resources, of course.

Let me explain. The more uncertainty there is in the market, the more investors seek for safe-haven assets such as gold. This drives up gold prices and, in turn, drives up the share prices of commodity producers on the JSE. This, along with the notorious power cuts South Africa has been experiencing, which have a direct effect on the supply of commodities, means the more we have load shedding, the higher the commodity prices. Ironic, right? If looking to invest in gold investors can look at instruments like PAX Gold (a gold tracking cryptocurrency), gold mining companies and gold tracking exchange-traded funds (e.g. 1nvest Gold ETF).

Conclusion

Given the massive volatility at the start of 2023, followed by increased uncertainty introduced by banking concerns and the intensifying war in Ukraine, stock picking has become extremely difficult. For this exact reason, ETFs have been developed to take a more passive, less risky approach to investing. This might be the perfect time to use these diversification investment tools to wait out the global uncertainty and protect your capital for a more favourable stock-picking environment.  

Which ETFs? You decide! Divan has highlighted ETFs in this article that have more exposure to developed equity markets  (NASDAQ 100 & S&P 500), bonds and clean energy (ETN).

Companies in the luxury sector are trading at luxury valuations. The Finance Ghost also takes a look at the banking sector and the buzz around copper.

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US semiconductor giant Intel is struggling at the moment, but its investments do provide hope for a better future.