Global Market Overview
Global markets delivered a more nuanced picture in February, with leadership continuing to broaden beyond the traditional US large-cap growth complex. While the MSCI World was broadly flat for the month at 0.73% in USD, and the S&P 500 and Nasdaq 100 declined by 0.79% and 2.28% respectively, other regions and styles offered stronger returns. The MSCI Emerging Markets Index gained 5.50% in USD over the month, while the FTSE 100 advanced 4.87% and Japan’s JPX-Nikkei Index 400 rose 9.68%, highlighting a market environment in which returns were increasingly being generated outside the narrow US technology leadership that defined much of the prior cycle. On a year-to-date basis, this divergence was also clear, with MSCI EM up 14.83% in USD and the JPX-Nikkei Index 400 up 16.52%, compared with the Nasdaq 100 at -1.08% and the S&P 500 barely positive at 0.62%. The global property segment also rebounded strongly, with the S&P Global REIT Index returning 6.16% in USD for the month and 9.32% year to date.
The softer tone in the US reflected a combination of slower economic momentum and a more cautious policy backdrop. US fourth-quarter 2025 GDP slowed sharply, while inflation moderated but remained sticky enough for the Federal Reserve to keep rates unchanged. Manufacturing and services indicators remained in expansionary territory, suggesting that the US economy was slowing rather than stalling, but equity markets became more selective and less willing to reward expensive growth indiscriminately. That helps explain why the broad US market underperformed more cyclical and non-US opportunities during the month.
Outside the US, the picture was more constructive. The UK benefited from a slightly more dovish policy tone and easing inflation, while Europe continued to enjoy a gradual disinflationary trend and a manufacturing recovery from very weak levels. Japan also stood out positively from a market-return perspective, even though its macro backdrop remained mixed. China remained constrained by weak domestic demand and softer activity indicators, though the broader emerging market complex still outperformed meaningfully. Taken together, February suggested that the global opportunity set is broadening, with emerging markets, selected non-US developed markets and listed property beginning to contribute more meaningfully to returns.
South African Market Overview
On the local front, South African markets enjoyed an exceptionally strong February, supported by a more constructive domestic macro backdrop, improving fiscal credibility and a firmer commodity complex. The FTSE/JSE All Share Index returned 7.01% in ZAR for the month and 10.99% year to date, while SA Listed Property gained 6.29% for the month and 7.33% year to date. Bonds also delivered a positive return of 1.74% in ZAR for February, taking year-to-date gains to 3.73%, while cash remained stable with the STeFI Composite up 0.51% for the month and 1.09% year to date. These were strong absolute outcomes and reflected a supportive combination of local and global factors.
The macro foundation for this performance improved meaningfully during the month. The February market backdrop was supported by a more credible domestic fiscal narrative, moderating inflation and a stable monetary policy stance. Investor confidence was helped by the ongoing emphasis on debt stabilisation, lower debt-service pressure and a narrowing fiscal deficit, while softer inflation kept the possibility of future rate relief alive. This environment proved particularly supportive for local bonds and property, both of which responded well to lower inflation expectations and improved confidence in the domestic policy mix.
Equity leadership within the local market also told an important story. Resource-linked counters and recovery names led performance, reflecting both stronger commodity sentiment and greater willingness by investors to re-rate cyclical and value opportunities. At the same time, the local market benefited from improved sentiment around South Africa’s medium-term reform trajectory and a stronger fundamental backdrop than many investors had previously expected. Overall, February was a strong month for South African assets and reinforced the view that local markets can perform well when domestic credibility improves and the external environment is not overtly hostile.
Key Insights from Weekly Investment Team Meetings
- Global market leadership continued to broaden beyond the US mega-cap technology complex.
- Emerging markets, Japan, the UK and global listed property were among the strongest offshore performers in February.
- South African equities, listed property and bonds all delivered solid positive returns during the month.
- The February environment continued to reward diversification, regional breadth and selective exposure to value, resources and non-US opportunities.
Portfolio Performance and Strategy
From a portfolio construction perspective, February reinforced the value of remaining balanced and globally diversified rather than overly concentrated in the narrow US growth trade. While weakness in the S&P 500 and Nasdaq 100 was not severe in absolute terms, it stood in contrast to the much stronger returns from emerging markets, Japan, the UK and global listed property. That argues for maintaining meaningful exposure to non-US developed markets, emerging markets and global real assets where valuations and cyclical dynamics appear more supportive.
Locally, the month strengthened the case for maintaining exposure to South African risk assets where valuations remain reasonable and the macro backdrop is gradually improving. SA equities benefited from both domestic reform credibility and resource-sector strength, while listed property and bonds also responded positively to lower inflation and a more stable policy backdrop. This combination is constructive because it suggests that local return opportunities are not confined to a single asset class.
In practical terms, February’s market action supports an approach that remains diversified across local and global asset classes, is open to broadening leadership outside the US, and continues to treat commodities and selected South African cyclical and value counters as important portfolio building blocks. At the same time, the uneven global growth picture and still-cautious central bank stance mean portfolios should remain adaptable. The environment is improving, but it is not yet one in which indiscriminate risk-taking is warranted.
Source of all data: Morningstar, unless otherwise stated.
Jacques de Kock
Quantitative Analyst & Portfolio Manager
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