Good news: Apart from the new iPhone 16 launch, locally, the FSCA has given the green light for the JSE to split its main board to help smaller companies raise capital with less red tape.

The big one to watch today, though, is the US’s CPI announcement this afternoon, because it could signal interest rate cuts which will likely spur SA rate cuts, too.

Here’s what we think could happen…

Shining some light on 🔦 

• September interest rate cuts – what we’re expecting.

• The Caxton dip, the transport boom & On kicking Nike.

• Stock update: Higgo’s Top 10 stock picks for 2024

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

• How to use your home loan to become your own bank.

Ready for Rate Cuts?

All eyes are on the US Consumer Price Index (CPI) announcement set for later today at 14:30 PM. 

With inflation seemingly under control – we love using this tracker because it’s been so very accurate of late – we’re looking at a scenario where the US Federal Reserve could announce interest rate cuts in September. 

Here’s what we’re predicting and how it could affect South Africa.

US Rate Cuts: What to Expect

The market is pricing in a 30% chance of a 50bps (0.50%) cut and a 70% chance of a 25bps (0.25%) cut – see the insights by Investec’s chief investment strategist Chris Holdsworth. 

This reflects growing confidence that inflation is cooling, with the potential for more cuts by the end of 2024, possibly amounting to a total of 100bps. 

The trajectory could see further reductions into 2025, with up to 250bps cuts expected by next October.

• A 50bps cut would mean a 0.5% reduction in the interest rate, immediately lowering borrowing costs and easing financial conditions for consumers and businesses alike.

• A 25bps cut would take a more gradual approach, possibly with another 25bps cut later in the year, giving markets and borrowers a slower, more measured relief.

Internally, most of the team believes it’ll be a more measured set of maybe 3 or so consecutive 25bps cuts over the next few months.

How This Affects South Africa

South Africa tends to follow US monetary policy trends, meaning a US rate cut could signal a local rate reduction soon. 

Our forecast is that we could see a similar 50bps cut here in South Africa, or consecutive 25bps cuts starting as early as September and continuing over the next few months.

On top of that, South Africa's parliamentary finance committee is also reviewing inflation targeting. They’re considering reducing the current target range of 3-6% to a tighter band of 2-4%, with an ultimate goal of stabilizing inflation at 3%. 

This move would aim to bring more stability to the Rand and strengthen the currency against foreign competitors.

What This Means for You

From a personal finance perspective, interest rate cuts can be a powerful wealth-building tool. 

Here’s how:

1. Lower borrowing costs: Whether it’s your home loan, car finance, or personal debt, lower interest rates mean cheaper monthly repayments. This frees up extra cash that can be redirected toward investments or savings.

2. Investment opportunities: Rate cuts tend to stimulate stock markets and create favourable conditions for investment growth. Equities often perform well as businesses benefit from cheaper borrowing, and investors may want to capitalize on this momentum.

3. Real estate: Property becomes more accessible as lower rates make bonds more affordable. This can drive demand for real estate, increasing property values over time.

Opportunity to refinance: If you already have a loan, rate cuts present a perfect chance to refinance and secure a lower interest rate, further reducing your debt load and fast-tracking your financial goals.

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

📰 Caxton & CTP Dip: Caxton and CTP reported FY 2024 revenue of R6.9 billion, down 1.1%, with net income falling 11%. Despite the drop, shares are up 9.5% this week.

🚚 Frontier Transport's 5-Year Boom: Investors in Frontier Transport Holdings (JSE) are celebrating a massive 284% total shareholder return over the past five years, driven by steady earnings growth. The stock also saw a 94% boost in the last year, including dividends.

🟡 Pan African Earnings Surge: Pan African Resources expects earnings to rise by 25%-35% for FY 2024, with headline earnings per share between US3.99c and US4.31c, boosted by higher gold sales and prices.

🌱 NextEra: Renewable Energy Leader: NextEra Energy (NYSE) is the world’s largest wind and solar producer with a market cap of $165.47 billion and strong hedge fund support. Its renewable capacity and long-term investments make it a top stock to watch.

👟 Nike vs. On Holding: Nike’s stock is down 24% this year due to slow growth and a shift to direct-to-consumer sales. Meanwhile, On Holding has surged nearly 70%, driven by strong performance and expansion into new markets. While Nike tries to regain ground, On looks like the stronger stock for now.

UPCOMING EARNINGS REPORTS

These companies are expected to deliver earnings reports in the next few weeks:

11 September 2024

• Pan African Resources

12 September 2024

• Sibanye-Stillwater

19 September 2024

• Remgro

WEALTH HACKER’S KIT

How to Become Your Own Bank

By using your home loans and access bond…

Most people don’t realise how powerful their home loan can be. When used smartly, you can turn it into a tool for financial freedom – essentially becoming your own bank. 

Here’s how…

Amortisation: How Home Loans Work

Amortisation simply means paying off debt over time with regular payments. With a home loan, your monthly payment is split between interest (the bank’s profit) and the principal (your debt).

At first, most of your payment goes to interest, but as time goes on, more goes to reducing the loan. Make extra payments early, and you’ll save big on interest and shorten your loan term. 

On a R1 million loan at 9.5% interest, this balance shifts around year 12.

How an Access Bond Works

An access bond allows you to withdraw extra payments you've made on your loan. 

Paying extra reduces your loan balance, lowering the interest charged. 

The best part? You can still access those extra funds anytime. Whether it’s reducing your repayment or withdrawing to invest elsewhere, the power is in your hands. Just check how your bank handles extra payments—policies vary.

Home Loan vs Savings Account

With current savings rates around 7–8% and the prime interest rate at 11.75%, your access bond offers better value. Instead of earning interest, you’re saving it, and those savings are tax-free!

Use Your Property to Fund Your Future

As you pay off your loan or your property’s value increases, you build equity. 

You can tap into this equity by taking a second loan or withdrawing from your access bond – ideal for funding new innitiatibes, such as business ventures.

THE PEOPLE HAVE SPOKEN

We asked what’s driving your immediate investment decisions, and most are eyeing new products… 

🟨🟨🟨⬜️⬜️⬜️ 📉 Falling interest rates – more disposable income means more investing! (20%)

🟨🟨🟨⬜️⬜️⬜️ 💰 Crypto recovery – Bitcoin’s rise is drawing my attention. (20%)

🟩🟩🟩🟩🟩🟩 💼 SA investment platforms like EasyEquities – new products are looking good. (40%)

🟨🟨🟨⬜️⬜️⬜️ 🤷‍♂️ I’m still figuring it out – waiting to see how markets shift this month. (20%)

What you said…

Keep an eye out for today’s news, Asethemane. Rate cuts look very likely now. 🔎

Definitely, Shaun. More liquidity and optimism in the market mean it’s time to grow. 📈

See you next week Wednesday — and remember, your money matters.