What investors can expect in 2026

By almost any measure, 2025 was a very good vintage for investors and, for many, simply staying invested paid off handsomely.

But markets have a nasty habit of punishing complacency. The question for 2026 is therefore not what worked last year, but what still holds true now.

Looking back, local markets had a standout year. South African equities gained around 37%, while bonds were up roughly 21% in rand terms. What made those returns even more pronounced was the rand itself strengthened, appreciating by more than 12% against the US dollar.

Importantly, this performance was underpinned by improving, broad-based domestic conditions. South Africa’s removal from the FATF grey list restored trust and signalled that our anti-money laundering framework is robust. That matters far more than many investors appreciate. Being off the grey list reduces friction in cross-border transactions, lowers compliance costs, and makes it easier and cheaper for capital to move. It also improves South Africa’s standing on other high-risk monitoring lists, further easing the flow of investment.

Alongside this, a sovereign ratings upgrade sent a clear signal of improved fiscal health and stronger institutions. Credit ratings matter because they influence borrowing costs and investor perception of risk. Lower perceived risk supports currency stability, anchors inflation expectations, and makes South African assets more attractive to foreign investors.

The shift to a lower inflation target, from 3.6% to a 3% anchor, has also been significant. Foreign investors have responded positively, with greater willingness to fund government debt as confidence grows that inflation is under control. That, in turn, supports expectations of capital gains and reinforces rand stability.

Eskom remains central to the bigger picture. When load shedding intensified in previous years, rand depreciation moved almost in lockstep with worsening stages. Markets respond quickly to negative signals, and electricity instability has long been one of South Africa’s most damaging confidence shocks. Reduced load shedding is therefore a critical positive for all South African assets. Confidence, after all, is the cheapest form of stimulus.

These improvements did not materialise overnight. After 2018, markets expected a rapid turnaround, only to realise that institutions had been hollowed out to such an extent that rebuilding would take time. We are now starting to see the benefits of restoring that institutional muscle, and credibility is slowly being earned back.

So where does this credibility show up first? In reality, it shows up broadly across confidence, rather than in a single asset class. Equity managers increasingly favour shares over bonds, with bond returns expected to moderate after an exceptional year. Property is shifting toward more stable, income-oriented returns. In terms of industries to look out for, banks, healthcare, retailers, and everyday domestic businesses stand out, alongside quality mid-cap companies with strong cash flow and credible management teams. Lower interest rates support credit growth, disposable income, and earnings resilience across these sectors.

Finally, local commodity stocks deserve particular attention. They delivered phenomenal returns in 2025 but are, by nature, volatile. While it is reasonable for investors to ask whether it is time to take profits, fundamentals point to another good year head. Precious metals such as gold and silver, alongside base metals like copper, continue to benefit from rate cuts, global uncertainty, and structural demand driven by artificial intelligence and decarbonisation.

Offshore, global equities also delivered strongly in 2025, with the S&P 500 up around 17-18% for a third consecutive year. That performance was driven largely by a narrow group of AI-related stocks, highlighting elevated concentration risk. Looking ahead to 2026, expectations are wide-ranging, with forecasts spanning low single digits to high teens. Bulls continue to point to an AI-driven supercycle, record capital expenditure, and rapid earnings growth, supported by further US rate cuts.

What will be important to watch is whether returns begin to broaden beyond a handful of mega-cap technology names. Toward the end of last year, the Dow Jones Industrial Average began to outpace the Nasdaq, hinting at a potential shift away from extreme concentration and toward more diversified leadership.

For investors, this points to a year that will reward selectivity rather than speculation. A recent BlackRock article described 2026 as a market for investors, not gamblers. The opportunity lies in earning quality income alongside durable growth, being paid appropriately for risk, and constructing portfolios with intention.

At PSG, we recommend 60% local, 40% offshore when considering portfolio diversification, but that might be too aggressive for some. While the exact split will differ by investor, the fundamentals remain the same: stay invested; make sure you earn and reinvest your dividends;?and let time do the heavy lifting for you. Sure, there will be bumps in the road, but if you focus on companies that generate strong, sustainable case flows, your income will continue to deliver for you.