Across the Atlantic, US markets exhibited resilience despite lingering uncertainties surrounding President Trump’s trade policies. The S&P 500 gained 2.76% for the month, with the technology-heavy Nasdaq 100 advancing 2.24%. Investors remained focused on the Federal Reserve’s stance on interest rates, as inflation showed signs of rearing its ugly head once again. The Fed’s cautious approach to potential rate cuts helped stabilize investor sentiment, with markets pricing in gradual (if any) adjustments throughout the year. Notably, AI and blockchain-related stocks continued to capture investor attention, albeit with heightened volatility, as regulatory scrutiny increased around data privacy and digital asset security. The performance of mega-cap technology firms remained a key driver of US equity markets, with corporate earnings playing a pivotal role in sustaining momentum.
In other developed markets, equity markets posted solid gains, with the MSCI World Index up 3.53%. The Stoxx Europe 600 and FTSE 100 benefited from investor rotation into sectors that had underperformed in 2024. European equities were supported by a relatively weaker Euro, which boosted export-driven industries, particularly in Germany and France. The European Central Bank maintained a cautious stance on monetary policy, with inflation dynamics continuing to guide expectations. While energy price volatility remained a concern, improved supply chain conditions and resilient consumer spending helped stabilize economic activity. The technology and industrial sectors performed well, while financials remained under pressure due to ongoing regulatory changes and shifting interest rate expectations.
Emerging markets delivered mixed results. The MSCI Emerging Markets Index edged up 1.79%, driven by strength in select Asian economies such as India and Brazil, where economic reforms and strong domestic demand provided tailwinds. However, China’s Hang Seng Index struggled, edging up 0.85% in USD terms, reflecting investor concerns over slowing economic momentum and regulatory uncertainty. The property sector in China continued to weigh on overall sentiment, with unresolved debt issues among major developers posing risks to financial stability. Additionally, geopolitical tensions between China and Western nations remained an overhang, influencing capital flows and investor risk appetite.
South African Market Overview
On the local front, the FTSE/JSE All Share Index posted a 2.32% gain in January, buoyed by strength in resource stocks amid rising commodity prices. Gold and platinum miners saw significant gains as global demand for safe-haven assets increased in response to geopolitical tensions and currency fluctuations. South African bonds posted modest gains, with the FTSE/JSE All Bond Index rising 0.44%, supported by stable yields and investor demand for real returns amid persistent economic uncertainty.
A significant legislative development came with President Cyril Ramaphosa signing the revised Land Expropriation Act into law, marking a pivotal moment in South Africa’s land reform strategy. The act, which clarifies the terms under which land can be expropriated without compensation, sparked mixed reactions from investors. While proponents argued it would address historical injustices and enhance land accessibility, critics feared it could undermine property rights and deter foreign investment. Property and banking stocks experienced some volatility as the market digested potential long-term implications, with investors seeking clarity on implementation mechanisms and compensation models.
Internationally, the act drew sharp criticism from US President Donald Trump, who labelled the policy as detrimental to investor confidence and signalled potential economic repercussions. His administration hinted at possible trade restrictions in response, further adding to the geopolitical complexity that markets had to navigate. Trump’s rhetoric, coupled with broader US foreign policy shifts, heightened volatility in emerging market currencies, including the South African Rand, which faced periodic depreciation pressure.
Despite the positive equity market performance, economic conditions remained challenging. Load shedding also popped up again, weighing on business confidence and economic growth prospects. Inflationary pressures were relatively contained, though rising food and fuel costs remained concerns for policymakers. The South African Reserve Bank cut interest rates by 25bps, diverging from the general playbook of following the Fed. Market participants continued to speculate on the likelihood of more rate cuts later in the year, depending on inflationary trends and global monetary policy shifts.
Portfolio Performance and Strategy
Our portfolios remained well-positioned to navigate this evolving landscape. We cut our overweight exposure to SA equities favouring developed market equities with the proceeds. Global diversification also played a crucial role, with developed market equities outperforming and offsetting some of the weakness in emerging markets. Tactical allocations within fixed income continued to reflect our dynamic approach, balancing duration exposure with evolving yield curve dynamics. Short-duration bonds provided stability amid uncertainty, while selective exposure to inflation-linked instruments provided some protection against potential cost pressures.
Looking ahead, global monetary policy shifts, geopolitical developments, and technological innovation will remain key market drivers. The implications of South Africa’s land reform legislation will be closely monitored, particularly in relation to investor sentiment and potential external policy responses. Additionally, corporate earnings season will provide further insights into sectoral performance, guiding our allocation strategy. Our investment strategy continues to prioritise adaptability, sectoral opportunities, and a balance between tactical and core positioning to navigate an increasingly complex macroeconomic environment.
Source of all data: Morningstar, unless otherwise stated.
Jacques de Kock
Quantitative Analyst & Portfolio Manager
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