Can The Jse Head Upwards Forever? (spoiler – It Can’t) |

For example, consider the banking system. In 2009, South Africas banks looked seriously impressive, especially when compared with the troubled banks in Europe and the United States. Today, however, the banking system is looking a lot more rickety thanks to rising non-performing loan impairments, particularly in unsecured loans to consumers. And its not just banking that looks less stable. Lets take a look at some key indicators, and how theyve evolved over the last five years. First, lets look at GDP. As you know, GDP measures the total overall production of goods and services in an economy in other words, the size of the economy. Typically, youd expect stock prices to bear some relation to GDP; as the economy grows, companies housed within the economy would grow too they would produce more and sell more. The relationship is not hard-and-fast, of course, it also matters what proportion of growth companies manage to capture as profits. For example, if a company was in a fast-growing economy, but the economy had very strong labour unions that could retain a lot of the growth as wage increases, then that company may not grow as fast as a company in an economy where a lot of the overall growth went to corporate profits. Nevertheless, there is usually at least some connection between economic growth and corporate growth. So, given how hard the stock market has run, wed expect South Africas GDP to have racked up some reasonably healthy growth. Look at the chart below.
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