March 2025 marked a challenging month for global markets, as investors were forced to recalibrate expectations in the face of renewed geopolitical friction and deteriorating trade dynamics. At the center of this turbulence was the Trump administration’s renewed push for tariff protectionism—sending shockwaves through global equity indices and amplifying risk-off sentiment. Conversely, South African equities managed to post solid gains, although this resilience was tested by deepening fiscal concerns and political tensions within the fragile Government of National Unity (GNU).
Global Market Overview
Investor sentiment soured markedly in March as US President Donald Trump followed through on campaign pledges by imposing broad new tariffs on imports from China, the European Union, and Mexico. The markets interpreted these moves as the start of a new phase in global trade tensions, prompting sharp declines in risk assets—especially in developed markets. The S&P 500 tumbled -5.67% for the month in USD terms, while the Nasdaq 100 fared even worse, falling -7.64% amid heightened sensitivity to global supply chains and the technology sector’s stretched valuations.
Broader developed market indices followed suit, with the MSCI World Index down -4.45% and the MSCI ACWI declining -3.95% in USD. Investors rotated out of growth-oriented sectors and into safer havens such as government bonds and cash, although even real assets like global REITs were not spared—down -2.49% in USD. European equities also struggled to find footing, although the FTSE 100 managed a modest gain of 0.42% in USD terms, supported by stable earnings from defensive sectors.
Emerging markets once again proved more resilient. The MSCI EM Index recorded a modest gain of 0.63% in USD, helped by relatively stable inflation and the potential for further Chinese fiscal stimulus. In particular, Hong Kong’s Hang Seng Index rose by 1.09% in USD, bolstered by investor optimism around infrastructure and consumer-linked stimulus measures. Japan also posted a minor positive return, with the Nikkei 400 rising 0.92% in USD.
The month’s developments reinforced growing concerns that monetary easing from the Federal Reserve may be insufficient to offset escalating global policy risks. The reappearance of synchronized equity and bond market stress suggests that traditional diversification may offer limited protection in this environment, which prompted us to take a more tactical and quality-focused investment approach.
South African Market Overview
In stark contrast to global equity weakness, South African equities surged in March. The FTSE/JSE All Share Index returned 3.55% in ZAR, supported by strong performances from diversified miners, industrials, and select financial counters. This local equity strength reflected both technical resilience and a rotation into emerging market assets amid weakening developed market confidence.
Despite the equity market’s strength, structural concerns within the property and fixed income sectors persisted. The FTSE/JSE SA Listed Property Index declined -0.90% in ZAR, weighed down by refinancing risks, rising operating costs, and weak tenant demand. The bond market fared only slightly better, with the FTSE/JSE All Bond Index up just 0.19%, reflecting persistent fiscal uncertainty and investor caution around sovereign risk.
These asset class divergences mirror a deeper macroeconomic anxiety. March brought renewed focus on South Africa’s deteriorating fiscal position following the national budget’s underwhelming reception. The Treasury’s struggle to rein in spending, alongside stagnant tax revenue growth, has led to questions about the sustainability of public debt and raised the specter of credit rating downgrades. Simultaneously, the GNU continued to show signs of political fracturing, with coalition partners diverging on key economic reforms and service delivery policies.
The inability of the government to build consensus on structural reforms—particularly around state-owned enterprises and labour market liberalisation—has started to undermine both business confidence and investor appetite for long-duration assets. Nonetheless, the Rand held relatively stable in March, providing a buffer for foreign investors and supporting a more favourable USD-converted return profile.
Key Insights from Weekly Investment Team Meetings
Across our March investment meetings, the team remained focused on managing downside risks while seeking selective opportunities in an increasingly bifurcated market environment. Several key themes emerged:
- Tariff Impact on Global Equities: The resurgence of trade protectionism featured heavily in our macro assessment. The team discussed sector vulnerabilities, especially in US tech and global manufacturers, and adjusted equity exposure accordingly.
- Emerging Market Divergence: While cautious on China’s regulatory backdrop, we noted relative strength in emerging Asia. This prompted a review of our EM allocations, with consideration for tactical exposure to commodity-linked markets and stimulus beneficiaries.
- SA Political Risk and Fiscal Trajectory: We undertook a deep dive into the national budget and GNU dynamics. Concerns about execution risk, rising debt service costs, and the lack of decisive leadership prompted further de-risking in local bonds and listed property.
- Positioning for Volatility: With equities and bonds showing rising correlation, we re-emphasized the need for cash buffers, gold exposure, and allocation to flexible, actively managed funds capable of navigating macro inflection points.
Portfolio Performance and Strategy
Our diversified and cautiously positioned portfolios helped mitigate much of the global equity drawdown in March. The overweight to resource-linked counters proved beneficial, while reduced exposure to US tech and broad developed market equities helped preserve capital.
Looking ahead, the investment environment remains fraught with geopolitical and policy risks. Trade frictions, political gridlock, and fragmented monetary policy responses are likely to dominate market dynamics. Our strategy continues to emphasize quality, liquidity, and downside protection, while maintaining flexibility to re-enter risk assets should valuations improve, and policy clarity emerge.
As March demonstrated, macro events can rapidly reset market expectations. Our disciplined, adaptive approach remains central to navigating the volatility ahead.
Source of all data: Morningstar, unless otherwise stated.
Jacques de Kock
Quantitative Analyst & Portfolio Manager
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