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August 9, 2024
August 9, 2024

Global Financial Markets in Turmoil Amid Recession Concerns and Geopolitical Tensions

As recession fears grip the United States, combined with overheated gains in the technology sector and tumultuous carry trade movements between the US and Japan, both economies and their stock markets face unprecedented challenges. On Monday morning, a dramatic sell-off hit both US and Japanese stock markets. The Japanese market experienced its most severe drop since the 1987 crash, with the Nikkei plunging 6.5% and some blue-chip stocks losing over 10% in a single day.
Financial Lines Climbing on Charts | Aluma Capital (Pty) Ltd

The crisis was exacerbated by rising interest rates in Japan and plummeting stock prices fuelled by recession anxieties, leading to margin and liquidity issues across the markets. However, a silver lining emerged on Tuesday, August 6, 2024, as the Nikkei made a partial recovery. The rebound was spurred by intervention from the Japanese central bank, which stepped in to stabilize the market and address liquidity concerns.

In parallel, escalating tensions in the Middle East have heightened investors’ appetite for riskier emerging market assets, putting significant pressure on currencies such as the South African Rand, which has depreciated sharply in recent days.

Stateside, recession fears intensified following a disappointing increase in non-farm payrolls for July 2024. This has sparked speculation that the Federal Reserve may consider more aggressive rate cuts to combat a potential downturn, raising concerns among investors and consumers alike. Should the US Federal Reserve lower interest rates, the South African Reserve Bank (SARB) might follow suit, as South Africa often mirrors US monetary policy trends rather than setting its own. South African consumers, currently grappling with a “cash crunch” amid soaring living costs, would likely welcome any rate relief from the SARB to alleviate financial pressures exacerbated by low demand and rising expenses over the past year.


Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd

Frederick Mitchell

Frederick Mitchell is an economist with 16 years of experience, specializing in the intersection of politics, economics, and finance on both domestic and international levels.

His extensive background spans the private sector, where he worked in equity and investment, as well as the public sector, where he served as a senior economist at SARS.

As part of the Aluma team, Frederick leverages his expertise to identify sectors with growth potential and assess those with higher risk, providing valuable insights and strategic advice.

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