Financial Market Outlook 2025 – Loving Local

Sanisha Packirisamy

Herman van Papendorp

Momentum Investments has unveiled its 2025 Financial Market Outlook, titled Loving Local, highlighting a strategic preference for South African assets over global alternatives.

This sentiment stems from stronger local fundamentals, attractive valuations, and anticipated rand strength.

Key market takeaways
• Our investment preference for local over global assets in the next year is premised on the combination of superior expected fundamentals, more favourable valuations and some anticipated rand strength.

• Several fundamental drivers that previously were headwinds for the South African (SA) economy and asset classes have now become clear tailwinds. These include the fading impact of loadshedding, optimism that the coalition government of national unity (GNU) will accelerate policy reform implementation to push the country’s growth rate higher, as well as falling inflation and interest rates providing support for consumption spending.

• Attractive local equity and bond valuations that still incorporate excessive risk premia should also support returns from these SA assets. SA cash currently offers an attractive prospective real yield to investors, particularly on a risk adjusted basis. Among the local asset classes, it is only in the listed property space where there are currently conflicting fundamental and valuation signals that make us circumspect about the risk-reward available in this sector.

• Although relative valuations continue to favour US bonds over US equities, the near-term slightly positive environment anticipated for equities compared to the overwhelmingly negative fundamentals expected for bonds, could cause this valuation gap to remain in place for some time.

• Uncertainties about the magnitude and timing of the implementation of president-elect Trump’s proposed policies on tariffs, immigration, deregulation and tax relief, increase the risk of (either negative or positive) policy surprises as 2025 unfolds, which could lead to elevated volatility in global markets.

• The main risk to the longevity of the current positive environment in the SA economy and financial markets would be a collapse of the GNU.

Financial market outlook for 2025: Loving local: click here