Investment Perspectives: Q4 2025

Highlights

Global markets delivered mixed performance in Q4, while South African asset classes performed well. Domestic equities posted exceptional full-year results, supported by the broader theme of non-US markets outperforming the US for the first time in several years. A weaker dollar and a strong rally in gold were notable features of 2025, signaling a shift in relative sentiment toward the US and aiding EM risk assets.

Three macro themes framed the year: renewed trade and protectionism concerns following early-year US tariff announcements; heightened focus on central bank policy amid sticky US inflation; and elevated geopolitical risk keeping volatility at times above historical norms.

In South Africa, the economy expanded slowly through the first half but shows encouraging signs heading into 2026. The fiscal picture has improved on the margin, the SARB has telegraphed its 3% inflation target, business confidence is stabilising, and South Africa’s risk premium has compressed as sentiment improved.

Markets

Domestic equities maintained momentum in Q4 (+8.1%), cementing 2025 as the JSE’s strongest year in over two decades (+42.4%). Precious metal miners were significant contributors, driven by sharp increases in gold and PGM prices. Banks and select large-cap industrials also provided meaningful support, broadening performance beyond resources.

Interest-rate-sensitive domestic assets performed well. SA listed property rose +16.7% in Q4, while the All Bond Index gained +9.0%, ending the year up +30.6% and +24.2% respectively. South African government bonds benefited from high starting real yields, easing inflation, rate cuts and improving investor sentiment.

Global equities ended Q4 modestly lower in rand terms (-0.8%), delivering +7.4% for the year. The MSCI ACWI returned +22.3% in USD terms, but dollar weakness detracted significantly for SA investors. 2025 was defined by the relative underperformance of the US versus the rest of the world. While AI-linked technology and semiconductor stocks continued to lead, leadership broadened across non-US regions and sectors as the year progressed.

Global bonds, proxied by the FTSE WGBI, fell in rand terms in Q4 (-3.9%) largely due to currency effects. For the year, the WGBI returned -5.9% in rand, reflecting persistent US inflationary pressures, delayed expectations of policy easing and ongoing US fiscal concerns.

Economy

The global economy displayed notable resilience through 2025, with the IMF estimating global growth at approximately 3.2%. Growth expectations were trimmed mid-year following tariff announcements but were later revised higher as the US softened its stance and global trade flows adapted.

Looking into 2026, the macro backdrop appears broadly benign, with potential for modest acceleration as policy uncertainty fades. The policy environment remains supportive of growth as inflation trends lower and fiscal settings remain accommodative in several major regions.

We remain mindful of late-cycle risks, particularly emanating from the US given its global influence. While US growth has been buoyed by strong AI-driven capital expenditure, further deterioration in consumer or labour market conditions could challenge the sustainability of that strength. A renewed inflation uptick remains a key risk given its policy implications, while geopolitical tensions could escalate unexpectedly given the current US foreign policy posture.

In South Africa, the economy expanded by roughly 1% in real terms in 2025, gaining momentum in the second half. Leading indicators suggest firmer growth in 2026. While structural constraints such as logistics remain, the direction of travel is encouraging. Elevated commodity prices offer a cyclical tailwind, and the SARB’s 3% inflation target framework creates room for further easing.

Fiscal dynamics have turned more constructive: South Africa’s debt-to-GDP ratio is cresting, National Treasury is running a primary surplus, debt servicing costs are declining, and recent sovereign rating improvements mark a notable shift. The exit from the FATF greylist enhances credibility. Combined with a potential turning point for the dollar, SA’s currency strength and lower long-bond yields may prove durable.

Portfolios

Multi-asset portfolios benefitted from strong South African asset performance in Q4, ending the year on solid footing. Full-year returns were robust despite specialist active equity managers finding it difficult to outperform a resource-led JSE in 2025.

We retain an overweight to SA equities, supported by reasonable valuations, improving fundamentals and supportive global macro conditions. Should non-US and EM outperformance persist, SA equities are well-positioned to benefit. Valuation support, earnings trends and momentum all reinforce this view.

We are also constructive on global equities and have added modest overweight exposure as global economic resilience has become more evident. While US valuations are elevated, strong earnings and growth justify maintaining pro-growth positioning. The debate around AI optimism remains active, but we believe it is premature to call an end to the outperformance of large-cap AI-linked stocks. Portfolio exposures remain diversified across regions, factors and sectors, with underlying managers generally underweight the US in favour of more attractive markets such as Europe.

As we enter 2026, portfolios remain balanced, diversified and opportunity-focused, while acknowledging the evolving nature of late-cycle risks. Markets are likely to remain noisy and volatile as new catalysts emerge. Equities may be susceptible to periodic pullbacks, but absent a material change in fundamentals, we expect to stay the course.