Market Watch - Multivest

South Africa’s strong 2025 equity rally, supported by improving sentiment, stabilising macro conditions, and a firm rand, sharply outperformed global markets and sets the stage for a more balanced but still risk‑aware investment environment in early 2026.

South African equities ended the month on a high, as the JSE All Share Index advanced a further 3.7% in January, leaving it up an extraordinary 43.4% over 1 year in rand terms. By contrast, the MSCI World Index, when priced in the same currency, managed only 5.52% for the year, underscoring how decisively domestic assets outperformed global peers. For South African investors accustomed to years of relative underperformance, the last year delivered a rare and powerful reversal.

The local market’s strength was supported by a combination of improving sentiment, stabilising macroeconomic conditions, and a political environment that, while still noisy, offered fewer surprises than in prior years. Inflation continued to drift lower, ending the year comfortably within the SARB’s target band, helped by elevated global commodity prices and a more stable rand. With inflation expectations anchored, the SARB maintained a cautious but constructive stance, signalling that the next policy move is likely downward should disinflation persist into early 2027.

South Africa’s fiscal picture remains challenging, but December brought incremental progress. Revenue collection outperformed mid‑year expectations, and the National Treasury reaffirmed its commitment to expenditure discipline despite ongoing pressure from state‑owned entities. Investors responded positively to signs that structural reforms, particularly in energy and logistics are slowly gaining traction. Load‑shedding intensity eased meaningfully in the final quarter, offering a welcome reprieve to both households and corporates.

Globally, the investment landscape was far more mixed. The United States entered the final stretch of the year with slowing but still resilient economic activity. Markets spent much of December recalibrating expectations around the Federal Reserve’s 2027 rate path, as softer labour‑market data increased confidence that the tightening cycle has definitively ended. Europe, however, continued to flirt with stagnation, weighed down by weak industrial output and persistent geopolitical uncertainty. China’s uneven recovery remained a drag on emerging‑market sentiment, though targeted stimulus measures helped stabilise activity late in the year.6

Political developments also shaped market behaviour. The U.S. administration’s policy direction particularly around trade and industrial strategy continued to influence global risk appetite. Meanwhile, several emerging markets faced heightened political volatility, reinforcing South Africa’s relative appeal as a more predictable, if imperfect, investment destination during 2026.

Currency dynamics played a crucial role in performance differentials. The rand held a surprisingly firm trajectory through the second half of the year, supported by improved terms of trade and renewed foreign inflows into local bonds and equities. This currency resilience amplified the underperformance of offshore assets when translated back into rand terms.

As 2026 begins, South African investors face a landscape that is more balanced than it has been in years. While risks remain both domestically and abroad the past year’s exceptional returns highlight the value of maintaining diversified exposure and staying responsive to shifting macroeconomic signals.

Supplied by Multivest Asset Management