Global Market Overview
July 2026 was a month of stark divergence across global markets. In aggregate, the MSCI All Country World Index (ACWI) ended the month broadly flat in US Dollar terms, returning just +0.08%, masking meaningful dispersion beneath the surface. The MSCI World Index of developed markets fared only marginally better, returning +0.51% in USD for the month, while the Hang Seng Index stood out as the standout performer globally, surging +13.43% in USD — a dramatic re-rating driven by improved sentiment toward Chinese assets and expectations of coordinated policy stimulus. The UK’s FTSE 100 was the second-best performing major market, returning +5.07% in USD for the month, supported by sterling strength and resilient commodity exposure. Japan’s JPX-Nikkei 400 delivered +1.86% in USD.
The most notable reversal of the month occurred within the US equity market. The NASDAQ 100 — which had powered global equity gains in the first half of 2026 — fell sharply, declining -6.59% in USD in July. The S&P 500 was effectively flat for the month at -0.08% in USD. This rotation away from US mega-cap technology reflects a theme the investment team has been closely monitoring: the growing risk of excessive concentration within US and global equity benchmarks. With the US market now exceeding 65% of the MSCI World, any derating of the large-cap technology complex carries significant benchmark-level consequences. The team views this rotation as overdue and consistent with a broader normalisation of risk premia.
Emerging markets, measured by the MSCI EM Index, pulled back -3.07% in USD during July, a result that is particularly noteworthy given the Hang Seng’s strength. This suggests that the positive China re-rating was offset by weakness elsewhere across the EM complex, further highlighting the importance of differentiated regional positioning rather than blanket EM exposure.
Global listed property delivered a constructive +2.61% in USD for the month (S&P Global REIT), extending its strong year-to-date performance of +15.17%. The asset class has benefited from moderating interest rate expectations in developed markets and improving earnings visibility for quality real estate operators.
On the macro front, US fiscal concerns remained elevated, with the trajectory of government debt a recurring topic in capital markets. The investment team continues to regard long-duration US Treasury risk as a structural concern rather than a cyclical one, and this view has supported a cautious approach to duration more broadly.
South African Market Overview
South African markets presented a mixed picture in July 2026, with equities and listed property delivering positive returns in rand terms, while the bond market pulled back materially.
The FTSE/JSE All Share Index returned +1.18% in ZAR for the month, recovering some ground after a difficult year-to-date performance of -1.81% in ZAR. The investment team notes that South African equities continue to represent a value proposition rather than a growth story. MSCI South Africa trades at a meaningful discount to both emerging market and global peers, with dividend yields that remain attractive in the 5–8% range. However, foreign investors have sold approximately R60bn worth of South African equities year-to-date, reflecting a combination of growth concerns, political uncertainty and global risk appetite. Banks remain the only sector in positive YTD territory, while miners have declined approximately 20%, weighed down by commodity price softness and infrastructure constraints.
SA Listed Property was the strongest performing local asset class in July, returning +2.30% in ZAR (YTD: +7.01% in ZAR). The investment team holds a positive view on quality SA REITs, supported by improving underlying fundamentals and attractive income yields relative to the risk-free rate.
South African bonds came under pressure during the month, with the FTSE/JSE All Bond Index declining -1.38% in ZAR (-2.34% in USD). This reflects the SARB’s July Monetary Policy Committee decision to hold the repo rate at 7.00% — characterised by ETM Analytics as a hawkish hold, not a dovish pause. The MPC vote was a 4-2 split, and the SARB’s communication made clear that inflation risks remain skewed to the upside. Oil prices, geopolitical uncertainty and rand weakness were flagged as the primary risk channels. FRA markets were pricing approximately three further 25 basis point hikes at the time of the meeting, although the investment team’s base case, informed by Cartesian Capital’s analysis, is that the SARB rate likely peaked at 7.00% and that May’s hike was primarily an insurance move.
June consumer inflation came in at 4.6%, while food CPI fell to a 17-month low of 1.6%, supported by a record maize harvest of 17.25 million tonnes. Oxford Economics’ updated South African forecasts project full-year 2026 CPI at 4.1%, with the policy rate ending the year at 7.3% before easing through 2027 to 6.3%. GDP growth expectations remain subdued at 1.1% for 2026, reflecting weak manufacturing activity — the ABSA PMI contracted to 47.3 — and deeply negative consumer confidence, which fell to -19 in the second quarter.
On the structural side, Eskom’s return to profitability and the improved electricity supply environment were noted as genuine positives for the economy. Transnet’s continued operational dysfunction, however, remains the single largest constraint on South African growth potential, and Oxford Economics estimates potential growth at approximately 1.5% per annum until meaningful logistics and infrastructure reform is achieved.
The political backdrop added complexity to the domestic macro picture. Recent by-election trends show continued ANC erosion — the party has recorded a net loss of 48 seats across 435 by-elections since 2021 — with the Patriotic Alliance emerging as the most notable political beneficiary in 2026. The DA achieved a breakthrough in Emfuleni. With November’s local government elections approaching, the investment team monitors political dynamics not as a near-term market trigger, but as a medium-term factor shaping governance quality, policy continuity and investor confidence in South Africa’s institutional framework.
Key Insights from Weekly Investment Team Meetings
The investment team’s strategy meeting of 13–14 July 2026 surfaced several important convictions that the team is actively incorporating into portfolio positioning:
– US market concentration is no longer a theoretical risk. The NASDAQ 100’s -6.59% decline in July, against broader developed market resilience, validates the team’s concern that elevated mega-cap technology exposure introduces meaningful benchmark risk. The investment team has been reducing concentrated US large-cap exposure in favour of downstream AI beneficiaries — including cybersecurity, defence, genomics and clean energy — accessed via thematic ETFs that offer broader participation in the structural technology cycle with reduced single-name concentration.
– The SA rate cycle is approaching its peak. The SARB’s July decision to hold at 7.00%, while hawkish in tone, was interpreted by the investment team — consistent with Cartesian Capital’s analysis — as likely the high point of the current cycle. Front-end SA government bonds are therefore viewed as increasingly attractive, with curve steepening expected as the rate outlook normalises. June’s foreign inflows into SA bonds of R15.2bn reflect some early validation of this view.
– South African equities offer income, not growth. The investment team acknowledges the challenging domestic growth backdrop (1.1% GDP expected for 2026) but maintains a positive view on SA equities as a value and income asset class. SA banks, quality REITs and selected resource stocks with compelling dividend yields remain areas of focus. The team is cognisant that foreign selling pressure has weighed on prices and continues to assess entry points.
– Emerging markets require selective positioning. The divergence between Hong Kong’s exceptional July performance (+13.43% in USD) and broader EM weakness (-3.07% in USD) reinforces the team’s view that EM should not be treated as a homogeneous block. Chinese policy signals and selective Asian exposure warrant careful monitoring.
– Political risk in South Africa remains a medium-term portfolio consideration. The by-election data confirms continued political fragmentation ahead of November 2026 local elections. The team does not expect near-term market disruption from this dynamic, but governance quality and policy continuity are monitored as part of the broader South African investment thesis.
– Global REITs continue to reward patient investors. With the S&P Global REIT Index returning +15.17% YTD in USD, the asset class has been one of the standout performers of 2026. The investment team’s positive stance on global listed property has contributed constructively to portfolio outcomes.
Portfolio Implementation and Strategy
The investment team’s approach to portfolio construction in July 2026 continued to reflect a disciplined balance between capturing structural opportunities and managing known risk concentrations.
On the global side, the team maintained a deliberate underweight to concentrated US mega-cap technology. The July sell-off in the NASDAQ 100 confirmed the value of this positioning, as portfolios with broader geographic diversification and lower US concentration experienced less drawdown relative to market-cap-weighted global benchmarks. The team’s preference for downstream AI beneficiaries — accessed through diversified thematic exposure — rather than direct ownership of the most highly valued platform companies, reflects a considered view on the asymmetry of risk at current valuation levels.
In South Africa, portfolios have been positioned with a preference for short-duration fixed income instruments over long-duration bonds, consistent with the view that the yield curve offers better risk-adjusted compensation at the front end while long-duration bonds carry undue sensitivity to potential further policy tightening or fiscal deterioration. SA cash, earning above 7% in the current rate environment, provides useful ballast and optionality.
The team holds a positive but selective view on SA equities, favouring income-generating exposure through SA banks and quality listed property, where dividend yields remain compelling relative to the risk profile of those assets. SA credit continues to be avoided, reflecting concerns about credit spreads relative to the available risk-adjusted returns in other parts of the fixed income complex.
Geographic diversification remains a central pillar of the team’s philosophy. In an environment where a single country — the United States — represents over 65% of the MSCI World Index, and where 94% of active US large-cap managers have underperformed over 20 years, the case for diversification away from benchmark-hugging global index exposure has rarely been stronger. The investment team views this environment as one that rewards active, multi-asset, geographically diversified portfolio construction over passive, index-replicating approaches.
Jacques de Kock
Quantitative Analyst & Portfolio Manager
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