Weekly Market Commentary

Global Market Update

US Fed’s Rate Cut and President Trump’s Win Boost Share Prices

US stocks ended a strong week with optimism fuelled by President-elect Trump's anticipated economic policies. However, Wall Street is beginning to question the feasibility of these ambitious plans, as seen in reduced gains for the dollar and treasury yields.?

The Federal Reserve’s anticipated 25 basis point rate cut added momentum to US stocks, with the S&P 500 reaching a yearly high.?

The US' S&P 500 rose 4.26% this week, rebounding from last week's 1.37% decline. In the UK, the FTSE 100 continued to struggle, down 1.08% after a 0.87% drop last week. The MSCI World Index gained 3.31%, a recovery from last week's 0.65% decline, reflecting broader investor optimism.

What this means for you: Your US portfolio should be up by 27.1% so far in 2024, which is a strong performance. This has been supported by the strong US economy and falling inflation. Going forward, we still prefer investing in US stocks to other markets. However, with a regime change, it’s still early days, and we expect some volatility when President Trump is inaugurated in 2025.

Nigeria’s Market Update

Macro Update

FG Launches Scheme to Attract Previously Undeclared FX Earnings

Nigeria is hunting for foreign currency to support the exchange rate and facilitate investments. In this regard, the FG launched the Foreign Currency Voluntary Disclosure, Depositing, Repatriation, and Investment Scheme (DDI Scheme), which allows individuals and businesses to bring previously undisclosed foreign currency obtained from legal means into the formal banking system without paying taxes, being investigated and risking forfeiture.?

For investment purposes, the earnings of participants in this scheme will be tax exempt and there are flexible options for repatriating such earnings.?

For balances that are uninvested, the Central Bank of Nigeria (CBN) has granted banks approval to trade such foreign currencies deposited. This move aims to boost liquidity in the foreign exchange market, stabilise the naira and attract foreign investors.?

What this means for you: On paper, this scheme looks great and it could potentially increase foreign exchange market liquidity, stabilise exchange rates, and encourage foreign investment. However, this scheme would only be impactful if it is able to attract sizable FX deposits.?

Equities Update

ASI Declined by 0.23%

The NGX All-Share Index (ASI) declined by 0.23% last week. Year-to-date market returns closed at +30.04% on naira basis. On a dollar adjusted basis, Nigerian stocks have lost 55.04% YTD.

Across sectors, market performance was uneven as the banking and oil and gas sectors recorded gains of 2.81% and 5.43% respectively. The consumer goods recorded a slight gain of 0.31% while industrial goods stock? declined by 0.02%.

What this means for you: We do not like Nigerian stocks right now as long-term investors. Investing in the S&P 500 would have delivered a dollar return of 26.41% YTD and naira return of 114.45%, which is better. Until we see a consistent trend of macroeconomic stability, which will be obvious in low inflation and stable exchange rates, we maintain an exposure to the US market.??

Fixed Income Update

Mixed Yields in the Money Market

The yield on the 91-day treasury bill increased to 24.37% from 21.62% in the previous week while the yield on the 182-day treasury bill decreased to 25.14% from 26.21%. The 365-day treasury bill yield increased to 24.57% from 24.48%.

In the bond market, where the FG borrows for more than a year, yields decline to an average of 18.84% from 18.95% in the prior week.?

What this means for you: The yields on treasury bills remain high, which means you can earn a higher return if you are saving for short-term goals (rent, school fees, etc.) in naira. You can do this with us on Ladda—a fintech app that helps you save at high returns. We do not recommend naira treasury bills and bonds for long-term investing.?

FX Update

Naira Weakens by 1.93% in the Official Market

The External reserves of the CBN increased by 0.78% to $40.08 billion from $39.77 billion last week, the highest level since 2021. Meanwhile, the naira depreciated by 0.26% in the official market, closing at N1,671.80 from N1,666.72 in the previous week.?

What does it mean for you: The moderate volatility in the exchange rate should be expected, given that it is partly driven by the demand for and supply of dollars. For some time now, the CBN has also focused on accumulating reserves rather than supporting the exchange rates. The $40 billion reserves level should support naira stability in the interim.

Remember to always save for your dollar goals in dollars. You can do this with us on Ladda—a fintech app that helps you save at high returns.