QUARTERLY MARKET INSIGHTS | Q4 2025

At MitonOptimal we take asset allocation (AA) very seriously, taking into consideration both Strategic AA (3-7 years) and Tactical AA within the various asset classes. This quarterly piece provides insight into our short term tactical calls on a 12-month view (reviewed quarterly) and as such may diverge from our long term strategic AA views. We review our strategic AA bi-annually as we believe this is prudent practice, in a world dominated by debt de-leveraging, central bank and political interference.

Source: Morningstar in ZAR

Q4 2025 was a quarter where domestic South African credibility and rate-sensitivity paid handsomely, while global markets delivered a more mixed experience beneath the surface. The most important driver of portfolio outcomes was not a single “risk-on” wave, but the combination of (1) falling local discount rates and improving inflation optics, (2) a supportive domestic bond backdrop that fed through into rate-sensitive SA assets (particularly listed property), and (3) a commodity complex that continued to behave like a strategic diversifier rather than a simple inflation trade. Against that backdrop, MitonOptimal’s positioning leaned into the right return engines: we were overweight SA equity and overweight commodities into a quarter where both delivered meaningful positive contribution, while several offshore defensive sleeves were not the place to hide.

Global Market Overview

This quarter was defined by a supportive policy direction, but with enough uncertainty and institutional “noise” to prevent markets from becoming a one-way bet. Early in the quarter, the US macro picture became unusually opaque as the US government shutdown (1 October to 12 November) delayed or cancelled key data releases, forcing investors to rely more heavily on private indicators and corporate reporting to infer momentum. That backdrop encouraged a more selective form of risk appetite, rather than a broad, indiscriminate chase. By December, the policy message became clearer but not necessarily simpler: the Federal Reserve cut rates by 25bp to 3.50%–3.75%, yet the vote split and accompanying projections implied a slower and more conditional easing path, with inflation still expected to remain above target for some time.

In practical terms, this supported equities in aggregate, but kept global duration and rate-sensitive real assets constrained by the long end of the curve, term premium uncertainty, and the reality that “one cut” does not equal “easy money”.

Against that global backdrop, asset class leadership was not uniform. Equity returns were positive in USD terms, but the leadership was less dominant than the prior “one-index” regime, and the global rate complex remained messy. In portfolios, this is exactly the kind of quarter where broad diversification matters: global equity may still contribute, but it is often the interaction between domestic credibility, commodities and the choice of offshore risk exposures that determines whether the quarter is merely “fine” or genuinely additive.

South African Market Overview

Locally, Q4’s story was far more coherent: South African assets were rewarded for a confluence of improving inflation dynamics and a clear policy pivot. The SARB cut the repo rate by 25bp to 6.75% in November, with a notably confident tone: the MPC judged there was sufficient scope to ease given low underlying inflation pressure and restrictive policy weighing on growth, while reaffirming commitment to a 3% medium-term inflation anchor. This matters because local asset prices—particularly bonds and listed property—are highly sensitive to the market’s confidence in inflation credibility and the sustainability of a lower-rate environment.

Economic and inflation data through the quarter broadly supported that confidence. South Africa’s Q3 GDP grew 0.5% q/q and 2.1% y/y, the strongest annual growth since Q3 2022, and while parts of the economy remained uneven (manufacturing was weak), the broader growth print helped stabilise sentiment around the domestic cycle. Inflation eased to 3.5% y/y in November, assisted by sharp disinflation in transport/fuel, although food inflation accelerated (notably meat). This combination—anchored inflation with pockets of pressure, and growth that was “good enough”—was highly supportive for the local discount rate, and therefore for the price action in bonds, listed property, and SA risk assets more broadly.

Within that broader macro mix, commodities were an important supporting thread rather than the sole driver. The commodity complex helped because the composition was favourable: energy was not re-igniting inflation pressure, while precious metals and PGMs were constructive for resource earnings and sentiment. Gold and platinum rose in November while Brent softened, and in December platinum surged sharply again amid tight supply conditions and supportive demand signals, a dynamic that tends to feed into South Africa through mining profitability, export receipts and resource-linked equity performance. In other words, Q4 benefited from a helpful asymmetry: commodities were supportive for the income side of the economy (via miners and exports) without imposing the usual inflation tax through oil.

Net-net, Q4’s domestic market strength read as a balanced credibility trade. The combination of easing policy, contained inflation, and a reasonable growth print improved the market’s confidence in the probability-weighted outlook—supporting bonds and property through discount rates and bolstering equities through sentiment and earnings expectations. Commodities complemented that picture by supporting resource-linked cash flows while not undermining the inflation trajectory, but the quarter’s broader takeaway remains that policy credibility and the discount rate were the main transmission mechanisms into SA asset performance.

SA EQUITY

OVERWEIGHT – OUTPERFORMED | +8.10% ZAR / +12.55% USD

We entered Q4 overweight SA equities, and that stance was rewarded as SA equity outperformed over the quarter. The performance outcome was consistent with a local market repricing a more supportive discount-rate environment. The SARB’s November cut did more than reduce the cost of money; it reinforced the credibility of the inflation path and signalled that restrictive policy had done enough of the heavy lifting to allow easing. For equities, that translates into a lower hurdle rate for valuation, and a more forgiving backdrop for domestic cyclicals, financials and other rate-sensitive earnings streams. Importantly, SA equity strength in Q4 was not predicated on a flawless growth backdrop—manufacturing remained fragile—but rather on the market’s confidence that inflation was contained and that policy was turning supportive. From a portfolio perspective, the overweight allocation ensured we captured the upside in a quarter where domestic confidence improved and risk premia compressed, contributing meaningfully to relative outcomes.

SA LISTED PROPERTY

NEUTRAL – OUTPERFORMED | : +16.27% ZAR / +21.06% USD

SA listed property was the quarter’s standout, outperforming materially, despite our neutral weight. This is the purest expression of a credibility-and-duration trade: listed property embeds long-duration cash flows and balance sheet sensitivity, so it tends to respond disproportionately when the market shifts from “rates are restrictive and sticky” to “rates can fall and the inflation anchor is credible”. Q4 provided exactly those conditions. The SARB’s easing, together with inflation readings that remained benign at the aggregate level, allowed the sector to re-rate sharply. Our neutral position still translated into a strong absolute and relative contribution simply because the move was large. Strategically, the outcome reinforces the role of property as a convex exposure in local portfolios: it can look quiet for extended periods, then deliver rapid upside when the rate narrative turns.

SA FIXED INTEREST

NEUTRAL – OUTPERFORMED | +8.96% ZAR / +13.45% USD

SA bonds outperformed at a neutral weight, providing both stability and meaningful return. The macro backdrop was supportive: growth surprised positively on a year-on-year basis, inflation remained anchored, and policy turned marginally more accommodative. That combination typically compresses yields and improves the attractiveness of domestic duration, particularly when investors gain confidence that the inflation anchor is being defended and that the easing cycle is sustainable. In Q4, bonds did what they are meant to do in a constructive SA credibility regime: deliver carry and capital gains and provide a strong foundation for risk assets. Neutral exposure therefore still contributed meaningfully, and—crucially—bond strength also fed through into property and equity valuations by lowering the domestic discount rate.

SA CASH

UNDERWEIGHT – NEUTRAL PERFORMANCE | +1.75% ZAR / +5.94% USD

Cash delivered what it should: a steady, low-volatility return, classified as neutral, while we were underweight. In a quarter where SA bonds, listed property and SA equity all delivered strong positive outcomes, holding less cash carried an obvious opportunity benefit. That does not diminish the role of cash in the process—liquidity and optionality remain essential in portfolios—but Q4 simply did not demand that protection. The underweight therefore improved return efficiency, ensuring capital was working in the parts of the opportunity set that were being rewarded.

GLOBAL EQUITIES

OVERWEIGHT –  NEUTRAL PERFORMANCE | 

We were overweight global equity, and the result was classified as neutral over the quarter. The global equity environment was supportive in direction but less generous in how it paid investors: policy moved towards easing, but with enough divergence, uncertainty and data-opacity (particularly during the US shutdown) to keep returns from becoming a broad-based surge. In USD terms, global equities were positive, but in portfolio terms the quarter was ultimately dominated by domestic SA rate sensitivity and commodity contribution. The overweight global equity position nevertheless played its strategic role: maintaining diversified participation in global markets while the portfolio’s higher-conviction return engines (local duration and real assets) did the heavy lifting.

GLOBAL PROPERTY

UNDERWEIGHT – UNDERPERFORMED | -4.48% ZAR / -0.55% USD

We were underweight global property, and that underweight was helpful as global property underperformed. This result is consistent with a global environment where policy support improved, but not in a way that instantly reduces real estate’s structural constraints. Global REITs typically require more than a single rate cut: they need stability in the long end, improving refinancing conditions, and confidence that credit spreads and transaction markets are normalising. Q4 offered some policy relief, but not a decisive “all clear” for global property. The underweight therefore avoided an area where the risk/reward remained less attractive and where returns lagged other opportunity sets.

GLOBAL FIXED INTEREST

UNDERWEIGHT – UNDERPERFORMED | -4.26% ZAR / -0.69% USD

Global bonds underperformed, and our underweight stance was beneficial. The December Fed cut did not translate into a straightforward bond rally because the broader message included a slower projected easing path and ongoing inflation uncertainty, reinforcing that policy is becoming supportive but not necessarily “easy”. In that environment, global duration struggled to deliver the defensive ballast investors often expect, and the underweight protected portfolios from capital losses in an asset class that was not providing strong diversification benefits during the quarter.

GLOBAL CASH

UNDERWEIGHT – UNDERPERFORMED | -3.07% ZAR / +0.93% USD

We were underweight global cash, and it underperformed on a relative basis. This is best understood as opportunity cost rather than “cash being wrong”: Q4 rewarded exposure to domestic SA rate-sensitive assets and to commodities, while offshore cash delivered only modest returns in USD terms and lagged more meaningful return drivers in the overall portfolio mix. The underweight therefore improved return efficiency without undermining the portfolio’s ability to stay liquid where it mattered most.

GLOBAL CASH

OVERWEIGHT – OUTPERFORMED | +1.66% ZAR / +5.85% USD

We were overweight commodities, and that overweight outperformed, behaving exactly as intended: a return contributor and a diversifier. Q4’s commodity tone was supported by dispersion within the complex—precious metals strength featured prominently, while energy was softer at points—yet the broader basket remained constructive. From a portfolio perspective, commodities added value alongside domestic duration: while SA bonds and property benefited from falling local discount rates and improved credibility, commodities provided a different return stream linked to real assets and supply/demand dynamics, which tends to be valuable when global policy paths are supportive but uncertain and when geopolitical and fiscal regimes keep investors attentive to tangible hedges. The overweight therefore strengthened overall portfolio resilience while also contributing positively to performance.

CLOSING SUMMARY

Q4 2025 was a quarter where the portfolio’s domestic SA bias towards rate-sensitivity and its real asset exposure were decisive. The overweight SA equity and overweight commodities were rewarded, while the underweights in global bonds, global property and the S&P 500 helped avoid areas of weaker relative payoff. Neutral exposure to SA bonds and SA listed property still added meaningfully because those assets delivered outsized returns as the local rate and inflation narrative improved. The quarter reinforces a key portfolio lesson: when the domestic credibility cycle turns, SA duration and SA rate-sensitive risk assets can deliver sharply positive outcomes, and the best portfolios are positioned to participate without relying on a single global index for returns.

• Overweight / Neutral / Underweight indicates the MitonOptimal asset allocation views
• Outperformed / Neutral / Underperformed indicates the asset class performance over the quarter

Source of all data: Morningstar.  Unless otherwise stated all local data is in ZAR and all offshore data is in USD.

DOWNLOAD: QUARTERLY MARKET INSIGHTS: Q4 2025

Jacques de Kock

Quantitative Analyst & Portfolio Manager

The content of this article is for information purposes only and does not constitute an offer or invitation to any person. The opinions expressed are subject to change and are not to be interpreted as investment advice. You should consult an adviser who will be able to provide appropriate advice that is based on your specific needs and circumstances. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable and given in good faith, but no representation is made as to their accuracy, completeness or correctness. MitonOptimal South Africa (Pty) Limited is an Authorised Financial Services Provider Licence No. 28160, regulated by the Financial Sector Conduct Authority (FSCA) – Registration No. 2005/032750/07.MitonOptimal Portfolio Management (Pty) Limited is an Authorised Financial Services Provider Licence No. 734, regulated by the FSCA – Registration No. 2000/000717/07.