Global Market Overview
Global markets began 2026 with a noticeably broader “risk-on” tone than we had become accustomed to in late 2025. While US equities still delivered positive returns, leadership was less concentrated, and the month’s “story” was as much about participation outside the US as it was about the S&P 500 itself. The MSCI World rose 2.24% and the MSCI ACWI gained 2.96% for January, but the strongest impulse came from outside the traditional developed-market core: the MSCI Emerging Markets surged 8.85%, and the MSCI ACWI ex-USA returned 5.98%. In other words, January looked more like a rotation month than a simple continuation of US exceptionalism.
Within the US, returns were positive but comparatively measured. The S&P 500 advanced 1.42%, while the NASDAQ 100 added 1.22%. That relative calm masked an important undercurrent: after a powerful 2025, markets entered January with higher starting valuations and a greater sensitivity to marginal changes in rates, liquidity and policy credibility. This matters because the “high wire” for markets in 2026 is not necessarily growth collapsing; it is whether investors continue to accept elevated multiples when policy uncertainty rises and when the cost of capital stops falling at the same pace. January’s performance suggests the market is starting to price this more selectively—still constructive, but less forgiving.
Outside the US, leadership was more pronounced. Asian and UK equity markets delivered strong gains, with the Hang Seng up 6.52%, the FTSE 100 up 5.07%, and the JPX-Nikkei 400 up 6.24% for the month. These moves reinforce a theme we have been tracking in our internal discussions: capital flows are increasingly willing to back non-US opportunity sets where valuations are less demanding and where the macro narrative is improving at the margin. Global listed property also participated, with the S&P Global REIT index up 2.98%, suggesting that the market is not only chasing growth but is also re-engaging with rate-sensitive assets where the interest-rate path looks less hostile than it did a year ago.
From a macro perspective, the Fed kept policy unchanged early in the month, but the tone remained “data-dependent” and credibility-conscious. Inflation dynamics are easing, but the labour market is slowing and consumer confidence has weakened — conditions that keep the door open to future cuts, while still requiring evidence that the economy is genuinely losing momentum. Late in the month, markets were reminded how quickly the narrative can shift: the announcement of a more hawkish-leaning Fed leadership candidate triggered a sharp repricing in precious metals on the final trading day. The key takeaway is not the one-day move; it is the message that 2026 will likely reward investors who can hold strong structural theses while still managing the path-dependent volatility created by policy and geopolitics.
Finally, commodities reasserted themselves as a central pillar in the global narrative. January’s leadership from emerging markets, the strength in commodity-linked equities, and the persistent bid for inflation hedges all point to a market increasingly attentive to supply constraints, geopolitical fragmentation and “resource security.” Whether this proves to be the early chapter of a sustained commodity upcycle or a volatile trading phase, it is already influencing how investors position across equities, currencies and real assets.
South African Market Overview
On the local front, South African assets delivered a solid start to 2026, supported by a favourable mix of easing inflation dynamics, a firmer Rand, and a commodity-backed bid for cyclicals. The FTSE/JSE All Share returned 3.72% for January, while the All Bond Index gained 1.95%, SA Listed Property added 0.98%, and cash (STeFI) returned 0.57%. In a month where global investors showed renewed appetite for emerging markets and real assets, South Africa benefited from its natural torque to commodities and the relative appeal of its yield backdrop.
A key contributor was currency strength. The Rand appreciated meaningfully against the US Dollar over the month, which both supported local inflation dynamics and reinforced the bond market’s constructive tone. A stronger currency acts as a near-term “safety anchor” for South Africa: it reduces imported inflation, improves the inflation forecast path, and gives the SARB more flexibility to consider easing — provided the risk backdrop remains stable.
Monetary policy reflected this improving inflation profile but also highlighted the SARB’s balancing act. The repo rate was kept unchanged at 6.75% (prime 10.25%), with a split decision that underscored an active debate about when to move next under the newly endorsed 3% inflation target. Inflation remains well-contained, and the forward profile has improved — yet the SARB is still mindful of supply-driven shocks (food and administered prices) and the risk that currency strength can reverse quickly if global conditions tighten. In practical terms, January did not signal an aggressive easing cycle; it signalled a central bank that is gaining room to manoeuvre but intends using it carefully.
The weaker link remains growth, and January’s data continued to show an economy that is stabilising unevenly rather than accelerating convincingly. Manufacturing indicators were particularly soft, reinforcing the idea that while financial conditions and inflation are improving, real economic momentum is still fragile. This is exactly why South African markets often behave like a “levered expression” of global risk appetite: domestic fundamentals matter, but global liquidity, commodity prices and currency direction frequently matter more at turning points.
Equity leadership locally was strongly commodity-driven. The JSE’s top performers were dominated by mining and resource names, consistent with the strength in precious metals and the broader EM/commodity complex. At the same time, several large global-exposure counters (notably the Rand-hedge/tech complex) pulled back as global tech sentiment cooled and investors took profit after 2025’s strong run. This divergence is important for portfolio construction: it reminds us that “South African equity” is not a single bet. In January it was two markets in one—resource cyclicals riding the global real-asset impulse, and global growth proxies responding to the changing tone in US tech and discount rates.
Key Insights from Weekly Investment Team Meetings
- The core debate is commodities: structural versus cyclical. A structural view supports maintaining a higher, more durable allocation through volatility; a cyclical view favours profit-taking on parabolic moves and re-entry on pullbacks.
- The rally is broadening beyond the “Mag 7” into EM, commodities and non-US developed markets, which is constructive for diversification but raises the importance of disciplined risk controls.
- A potential regime shift is forming: geopolitical fragmentation and central bank gold buying are increasingly influential drivers of cross-asset returns and currency outcomes.
- Risk management remains central: position sizing, mandates, and technical discipline (rather than emotion) will matter more in 2026 as volatility rises alongside opportunity.
Portfolio Performance and Strategy
January’s market action supports staying invested, but not complacent. The opportunity set is widening beyond US mega-cap growth, and the relative strength in EM, commodities and non-US equities is consistent with our preference for diversified return drivers. At the same time, the month reminded investors that policy and geopolitics can change the narrative quickly—often late, often abruptly. Our practical stance remains a balanced, adaptable approach: maintain exposure to the structural themes that are working (including commodities and diversified global equities), retain a clear risk framework to manage volatility, and remain ready to rotate as data and trend signals evolve through the first quarter.
Source of all data: Morningstar, unless otherwise stated.
Jacques de Kock
Quantitative Analyst & Portfolio Manager
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