A blend of active management and economic forecasting
Global financial markets seem disconnected from reality; at least, this is the sense your writer got when reviewing returns on major stock market indices in Africa, Europe and the United States (US) to end-June 2025. The world is awash with economic and political uncertainty, yet the JSE All Share Index was up 15%, the United Kingdom’s FTSE 100 6% stronger, and the US NASDAQ and S&P500 5% higher.
From impressive to ‘not terrible’
These returns are impressive for South Africa, and not terrible for the rest. The JSE All Share is well ahead of its 12% annualised return over the last decade, while the FTSE 100 is at parity over the same period. But the US indices will have to double up over the next six months to stay on trend. If the markets closed at today’s levels, South African and UK investors would be ahead of the game; those in the US would be rather miffed.
Today’s op-ed is stitched together from a media release and an economic presentation to a hybrid event. It seeks to makes sense of stock market resilience in a crazy world. “We may be at one of the most consequential turning points in history, and yet markets seem calm with many equity indices near all-time highs,” wrote Dirk Jooste, Fund Manager at PSG Asset Management, in a recent PSG Angle overview. He cautioned against investors’ natural expectation that the future will look like the past, and warned that yesterday’s winning shares cannot keep pushing equity markets higher.
No momentum to lift economic growth
Nicky Weimar, Chief Economist at Nedbank, said that South Africa was emerging from a decade of “subdued and disappointing economic growth”. In a presentation to the 2025 Elite Wealth Conference, she noted that the country’s GDP had sputtered along at just 0.8% in 2023, and had delivered an even worse 0.5% last year. “As we came into 2024, some of the electricity supply constraints started to improve, but the momentum was not there to lift growth to a higher level,” she said.
The economists hinted that the easing of structural constraints, coupled with lower inflation and interest rates through the second half, should steer the domestic economy along the road to recovery, perhaps explaining why the JSE climbed to record highs in mid-June 2025. “During the course of last year, [we saw] a noticeable easing in cyclical pressures … inflation came all the way down, and from September 2024 onwards, the Reserve Bank started cutting interest rates,” Weimar said. As cyclical pressures ease, households’ disposable incomes rise, and the resulting higher consumer spending supports economic growth.
Unfortunately, domestic and global politics continue to weigh on growth. In South Africa, early optimism over the Government of National Unity (GNU) has given way to uncertainty, as evidenced by the third-time-lucky passing of the 2025-2026 National Budget. “You do not want to see economic policy executed the way the fiscal budget was executed; hopefully [government] can put in place conflict resolution measures and systems and processes that are more robust,” Weimar said. Bottlenecks, disruption and policy uncertainty are net negative for economic growth. 
Companies choking on inefficient regulation
Electricity supply and transport and logistics were shortlisted as key constraints that must be overcome to get South Africa to the 3-4% per annum GDP growth needed to make a dent in unemployment. “The good news is we are crawling in the right direction; the bad news is that we have not made meaningful enough improvements to alter the cost structure for companies,” she said, before sharing the latest OECD country ranking of regulatory burden. South Africa is bottom of the rung on most measures despite (or perhaps because of) government’s full control of same.
The country’s manufacturing and mining sectors are on their knees, both failing to recover to pre-pandemic levels, which were lower than pre-Global Financial Crisis (GFC) times. “And on top of this nightmare comes a much more hostile global environment,” Weimar said. “The world economy has changed dramatically and has become highly unsettled.” She noted that the economic policies under Trump 2.0 were similar to those proposed during his first term, with the key difference being the extent of the Republicans’ political control.
US currency, financial markets look vulnerable
Trump policymaking features strongly in financial market analysis nowadays, with many commentators warning that the US could be in trouble. The PSG Angle write-up warned that we could be nearing the end of a 15-year bull cycle in US markets and the US dollar. “The strength of US assets and the dollar has been underpinned by multiple factors, but at least two of these, the shale oil boom and a narrative of US exceptionalism, appear to be peaking at the same time,” wrote Jooste. Trump’s proposed trade tariffs are not helping.
Weimar steered her audience through the rollercoaster equity market responses to the first 150-odd days of Trump’s second presidency. The market caps of the NASDAQ and S&P500 have ebbed and flowed through promises of deregulation, trade tariffs, tax cuts, and the Big Beautiful Bill, to name a few. Investors expected US exceptionalism to maintain following Trump’s election, and they have since dismissed negative connotations around his crackdown on illegal immigration. As a result, the US dollar and equity markets surged between September and December 2024, took a big hit around April, and then clawed back to where they are today.
According to the Nedbank economist, investors should brace for stickier global inflation, weaker US growth and weaker global growth as higher tariff barriers and reduced global trade filter through. In this context, company earnings will come under strain. “We are entering a world of raging uncertainty,” Weimar said. And this uncertainty will prove a drag on both economic growth and fixed investment. To illustrate, the IMF, OECD and World Bank have all lowered their most recent global growth estimates.
High inflation, low growth and rising uncertainty
PSG Asset Management reckons the coming decade will be dominated by higher inflation, perhaps even stagflation, and greater volatility. “Active management and value outperformance tend to shine [in such conditions],” wrote Jooste, before adding that an understanding of which macro regime you are trading through is crucial to achieving your long-term investment objectives. He warned that investors who stick with passive indices could find themselves exposed to companies that are more suited to yesterday’s macros: low inflation, falling rates, and US dominance.
“The MSCI World Index [still] has a 71% weighting to the US; investing in the index at this point in time does not achieve diversification … it is a bet on the continuation of the US exceptionalism narrative, at a time when it is already wearing thin,” he wrote. The S&P500 has problems too, most notably due to its “still rich” valuations. The asset manager prefers selected opportunities in emerging markets like Brazil and South Africa.
“Our portfolios are intentionally positioned to reflect our views on the changing global environment,” concluded Jooste. “We consciously include a well-diversified mix of emerging market exposure, South African secular winners, overlooked global value shares and real assets that offer inflation protection. This, coupled with much-needed, more predictable returns from emerging markets and local bonds, and dry powder in the form of cash, provides a resilient portfolio that will suit our investors in a challenging and unpredictable environment.”
Enemies and friends
South Africa relies heavily on China and the US for trade and could see pressure from both markets. The end of the US AGOA deal, plus the impact of US tariffs, could weigh heavily on the agriculture and automotive sectors, adding to the competitive drag that domestic firms face due to the country’s geographic location and well-documented electricity and logistics inefficiencies.
“The weaker world economy is probably going to translate into softer commodity prices too,” signalled Weimar. Gold may have shot the lights out over the past year or two, but the prices for copper, iron ore and platinum have been fairly flat. The key takeout from her presentation was that the South African economy will be driven by consumers and government infrastructure spending rather than agriculture, manufacturing or mining.
Government has set aside R1 trillion for infrastructure investment over the next three years, though there are concerns over whether local and provincial governments have the capacity to spend this cash. “Our view is government probably spends a little bit more on infrastructure; but this will not be sufficient to offset limited fixed investment by the private sector,” Weimar said.
Banking on low inflation, rate cuts and a steady rand
Concerns over fixed investment aside, Nedbank seemed upbeat on domestic prospects, saying the rand would hold ground against a weakening US dollar. “The rand will probably prove quite resilient [meaning] there is space for the Reserve Bank to cut rates in the short-term,” Weimar said. And despite ongoing conflicts in Russia-Ukraine and the Middle East, the economist expected domestic fuel prices to remain deflationary for most of 2025.
Consumers can look forward to one further 25 basis point rate cut before the SARB resets to a lower inflation target. Her hope is that consumers will benefit from contained inflation and lower interest rates, and lift the economy to around 1% growth in 2026.
Follow the writer on
LinkedIn: https://www.linkedin.com/in/gareth-stokes-media/
X: @stokesmedia
