Markets started 2024 intoxicated with the euphoria of the Federal Reserve Board’s (Fed’s) impending monetary policy pivot. Risk assets rode high on the wave of optimism for most of the first quarter (Q1-24), with emerging markets doing especially well. Unfortunately, as is generally the case, this optimism faded towards the end of the quarter, with the market’s initial pricing of 175 basis points (bps) of rate cuts for 2024 tapering to the Fed’s projections of only 75bps. South Africa (SA) has done little to positively differentiate itself from the rest of the emerging market basket. Uncertainty on the outcome of the local elections, possible coalitions and the policy implications thereof weighed on the performance of the rand and bonds, causing further underperformance relative to emerging market peers.

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