Buoyed by recent rate cuts, the South African Rand has been performing exceptionally well of late, fueling theories that this could be the perfect opportunity for SA to make some big moves against the dollar, fuel prices and inflation in over a decade. 

Yet, we’ve been adapted to a stronger Dollar for so long, how do you switch to ensure you benefit from a potential continued reversal?

Shining some light on 🔦 

• A strengthening Rand and falling inflation.

• SA bank moves, gold on the up & Meta VS Alphabet.

• Stock update: Higgo’s Top 11 stock picks for 2024.

• Earnings calendar: Who’s reporting on revenue, when.

• How to conquer debt and gain financial freedom.

THE SPOTLIGHT

THE SPOTLIGHT

Capitalising on a Stronger Rand

Over the past year, the South African rand (ZAR) has strengthened significantly against the US dollar (USD). As of late September, the USD/ZAR exchange rate dropped below R17 for the first time since early 2023, signalling a robust performance from the ZAR. 

But why is the rand gaining momentum, and where might it be heading?

Why the ZAR is Strengthening

• Prompted by low inflation, the US Federal Reserve’s 50bps rate cut softened it against global markets a bit.

• Off inflation falling to 4.4% in August, the SARB also cut rates, but only by a cautious 25bps.

• At the same time, the crude oil price is falling and commodities like gold and platinum (key SA exports) have rebounded.

• SA is also riding high on great positive sentiment due to the new GNU government structure.

• All while the SA economy is growing, expected to see its best performance in over a decade in the next two years.

Perfect Storm: A Strategic Play by SARB?

Some say this might just be the opportunity SA was looking for. With fiscal policy almost always eyeing inflation, a stronger Rand against the Dollar amid falling oil prices sets SA up to tackle one of our biggest inflation influencers: the fuel price.

As petrol and diesel prices fall, the cost of transporting goods decreases, leading to lower prices for food, clothing, and other essentials. But it also helps lower operating costs for local businesses and can help drive economic growth.

And pundits haven’t missed that economic growth could attract more foreign investment (currency), further strengthening the Rand. Some believe we could see the Rand reaching R16 or even R15 range to the Dollar in the next few months.

This could have a powerful effect: Cheaper imports, lower inflation and improved operational costs. But it could come with mixed consequences for South African investors exposed to international markets.

Benefiting from the ZAR Upswing

Now, many in South Africa have set themselves up for the opposite: SA individuals and companies delivering services to international clients will be the first to feel the pinch as the Rand improves, eroding previously inflated margins.

To adapt, consider:

• Using the stronger buying power to invest in foreign assets or diversify portfolios globally.

• But keep an eye on the local scene: Lower business costs could see SA Inc. perform well – including those who’ll benefit from lower import costs.

• If the Rand keeps strengthening, putting capital into assets that appreciate in value domestically (such as property) could benefit greatly from renewed economic growth.

Know How and Where to Invest

While the outlook is positive, South Africa’s economic growth will depend on continued reforms and improvements in key sectors.

So it always pays to focus on your core investment fundamentals like your risk profile and personal goals.

And, naturally, we can help you with those right now…

Note: This is not financial advice, merely observations. For personalised financial advice, you can book to speak to a financial advisor here (powered by a registered FSP: No. 51310).

STOCKS AND ALL

🏦 Big Bank Moves: Major South African banks are shutting down branches across the country in response to declining demand for physical banking services, with digital transformation cited as the primary driver.

🛢️ Pan African Earnings: Analysts forecast rising gold production for Pan African Resources, expected to reach 250,000 ounces annually by 2026. The company increased its dividend to R0.22 per share in 2024, with the potential for higher payouts as production rises and costs flatten.

🔍 Alphabet on Top: Alphabet’s stock is benefiting from its leading position in search and artificial intelligence, with Pivotal Research giving it a "Buy" rating and a $215 price target. With growth in Google Cloud, YouTube, and strong financials, Alphabet is poised for further expansion in the tech space, even as it faces regulatory challenges.

📊 Meta Contender: Alphabet and Meta dominate the digital ad market with a combined 57% market share. While Alphabet leads in search engine advertising, Meta's AI-driven apps fueled outsize sales growth in 2024. However, ongoing antitrust cases pose risks to Alphabet’s search and streaming revenues, possibly giving Meta an edge for growth potential in the near term.

WEALTH HACKER’S KIT

How to Conquer Your Debt and Gain Financial Freedom

Debt can be a serious roadblock on the path to financial freedom. It limits your choices, increases stress, and drains away your disposable income. 

But the right strategy can help you tackle it head-on and reclaim your financial flexibility.

Why Debt Sucks

Debt reduces your ability to invest in yourself, your lifestyle, and your future. 

Here’s a quick reminder:

• Assets generate passive income and grow your wealth.

• Liabilities drain your finances and limit your ability to create wealth.

Debt falls squarely into the "liabilities" category, but fortunately, you can conquer it using one of two key methods: the Snowball Method or the Avalanche Method.

Choose Your Debt-Smashing Strategy: Snowball vs. Avalanche

1. The Snowball Method: This method focuses on repaying the smallest debt first. As you clear each balance, you gain momentum, like a snowball rolling downhill, which can be incredibly motivating. The satisfaction of crossing debts off your list can keep you going even when the bigger ones loom ahead.

2. The Avalanche Method: Here, the focus is on tackling the debt with the highest interest rate first. This method is technically more cost-effective since it reduces the overall amount you pay in interest over time. It requires discipline but results in more savings.

Which One’s Right for You?

While the Avalanche Method saves more money in the long run, the Snowball Method can give you a powerful psychological boost through "wins" early in the process. 

The emotional lift from seeing progress might be just what you need to stay on track.

Want to get your debt paid off faster so you can invest more in building wealth?

We’ve built the tools to help you start right now…

THE PEOPLE HAVE SPOKEN

Where’s your focus in the AI investment space?

🟩🟩🟩🟩🟩🟩 🏆 Investing in chip manufacturers like AMD and Nvidia (30%)

🟩🟩🟩🟩🟩🟩 💼 Keeping an eye on high-risk AI startups (30%)

🟨🟨🟨🟨⬜️⬜️ 📊 Staying cautious with more traditional tech stocks (20%)

🟨🟨🟨🟨⬜️⬜️ 🌱 Exploring AI-related ETFs and mutual funds (20%)

What you said…

Indeed, Eric. We have AMD as one of our top picks for the year, and it’s been a decent performer overall. ⚡

See you next Wednesday for another edition of Money Matters.