Global Market Overview
Global markets ended August on a resilient note, though the picture was mixed across regions and asset classes. The MSCI World Index advanced +2.61% in USD, while the broader MSCI ACWI rose +2.47%, showing continued investor appetite for risk assets. Japan was the standout performer, with the JPX-Nikkei 400 surging +6.68% in USD, supported by strong services momentum and better-than-expected GDP growth. Europe’s FTSE 100 gained +3.35%, while the Eurozone remained subdued as weak export demand offset firmer services activity.
In the United States, equities delivered modest but uneven gains. The S&P 500 rose +1.99%, while the Nasdaq 100 lagged at +0.90%, pressured by weaker earnings guidance in the tech sector. The underlying US data painted a picture of an economy at an inflection point. Job creation slowed, with July nonfarm payrolls rising only 73,000, while unemployment edged up to 4.2%. Inflation progress stalled, with core CPI holding at 3.1% year-on-year, while producer price data suggested renewed pipeline pressures. Consumers continued to spend, but sentiment weakened as inflation expectations ticked higher. Against this backdrop, investors increasingly priced in potential Fed cuts later in the year, offering near-term support for equities even as bond yields at the long end crept higher.
Emerging markets struggled to keep pace. The MSCI EM Index added only +1.28% in USD, with China remaining a drag. The official manufacturing PMI came in at 49.4, marking a fifth straight month of contraction. CPI remained flat year-on-year, while the PPI extended its decline, pointing to entrenched demand weakness and a property sector still under strain. The Hang Seng index managed a modest +2.05% in USD, but sentiment toward Chinese assets remains fragile.
Commodities once again played a central role in market dynamics. Gold gained 4.8%, breaking out of a six-month consolidation, while platinum and iron ore both advanced more than 6%. The rally in gold and gold miners was a defining theme of August, reinforcing its role as a safety anchor amid heightened uncertainty around US monetary policy and geopolitical fault lines. By contrast, Brent crude oil fell more than 6%, as ample supply and easing Middle East risk premiums weighed on prices.
In summary, August underscored the duality of the global landscape: equities climbing on policy hopes, gold soaring as insurance, and bond markets flashing caution through rising long-term yields.
South African Market Overview
On the local front, August delivered one of the strongest months in nearly two decades, with gains across asset classes fuelled largely by favourable global conditions. The FTSE/JSE All Share Index climbed +3.53% in ZAR (+5.81% in USD), extending its year-to-date advance to a striking +23.57% (ZAR) and +31.78% (USD). Listed property followed suit, rising +2.80% (ZAR) and +5.06% (USD), while the All Bond Index added +0.75% (ZAR) and +2.97% (USD). Even cash returns edged higher, with the STeFI Composite up +0.61% (ZAR) and +2.82% (USD).
The strong performance came despite persistent domestic headwinds. The South African Reserve Bank’s late-July cut left the repo rate at 7.00%, offering some relief, yet inflation in essentials continued to bite households—water costs rose 12.1% year-on-year, electricity 10.6%, and meat 10.5%. Meanwhile, unemployment remained entrenched, with the Q2 rate climbing to 33.2%, and youth unemployment holding at an alarming 46.1%.
Geopolitics further complicated the picture. At the start of August, the US imposed 30% tariffs on South African exports, threatening GDP growth by 0.2 percentage points and jeopardising jobs in agriculture and automotive manufacturing. While July’s trade surplus of R20.3 billion provided a buffer, imports are growing faster than exports, highlighting underlying vulnerabilities.
Nevertheless, the Rand gained 3.1% against the US Dollar, driven more by global risk-on sentiment and surging commodity prices than by domestic fundamentals. Gold and PGM producers were the clear winners, with counters like Gold Fields and AngloGold Ashanti soaring on the back of record-high bullion prices. By contrast, SA Inc. names such as banks and retailers continued to trade at low valuations, constrained by poor business confidence, which slipped further to 39 in Q3.
South Africa’s August rally thus appears more the result of global tides than domestic reform—a reminder of both the opportunities and fragility of the local market.
Key Insights from Weekly Investment Team Meetings
- Equities continued to find support from strong corporate earnings and the prospect of Fed rate cuts, though some markets showed signs of technical resistance.
- Precious metals, particularly gold and PGMs, displayed strong bullish momentum, with gold miners seen as undervalued relative to the bullion rally.
- Long-term bond yields rose across developed markets, raising sustainability concerns for highly indebted nations, while South African yields remained attractive near 9–10%.
- Commodities showed divergent trends: bullish momentum in metals, caution in energy, and continued weakness in agriculture.
- In South Africa, the divergence between strong market performance and weak underlying fundamentals persisted, with banks and retailers offering value but struggling to attract foreign inflows.
- The team highlighted growing geopolitical risks, including potential US sanctions on South African companies, underscoring the importance of diversification and offshore allocations.
- Protection strategies, such as structured equity notes with downside buffers, were considered to balance participation in rising markets with risk management.
Portfolio Performance and Strategy
Portfolio positioning remains anchored in a barbell approach—holding exposure to growth drivers such as US equities and AI-linked themes on one side, and commodities and emerging market value on the other. The August rally reinforced our conviction in gold and PGMs as both performance engines and hedges against systemic risk.
Equity allocations remain overweight, particularly toward emerging markets and resource-linked counters, though tempered by protection strategies such as structured notes with 15–25% downside cushions. Developed market equities are maintained at more neutral levels, reflecting caution on valuations but acknowledgement of resilience in margins.
Fixed income remains a more tactical play. Long-term bond yields are rising globally, diminishing diversification benefits, but selective opportunities remain in South African government bonds, where yields above 9% offer value relative to peers. Cash allocations provide optionality in an environment where volatility could quickly resurface.
For South African portfolios, commodity producers remain favoured over SA Inc. names, though we continue to monitor banks and retailers for value. With the Rand supported by global sentiment, we see opportunities to selectively increase offshore allocations while maintaining sufficient local exposure for balance.
The strategy going forward is clear: lean into global momentum where justified, hedge with commodities and protection structures, and keep flexibility at the core of portfolio construction.
Source of all data: Morningstar, unless otherwise stated.
Jacques de Kock
Quantitative Analyst & Portfolio Manager
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