Insights
South African Investment Outlook - Jan 2025
Summary
The final month of 2024 reminded us of the sensitivities of South African asset prices to developments outside our borders, with risk-off sentiment causing the broad US dollar index to rally 7.6% - effectively reversing the strong rally in the rand since our election.
Considering the year in its entirety, has us noting that it was a good one for domestic assets in general – with small cap companies and longer duration government bonds being standout performers. While much good has come post the National Elections, a lot of work lies ahead – especially from a logistical perspective. We look for the rubber to hit the road in the first half of 2025 if the positive momentum is to be maintained and higher consumer and business optimism to follow through to increased consumption and capital expenditure.
From a financial market perspective:
- We now view SA government bonds to be priced close to fair value. That is, prior risk premia have been largely priced out by the market and, from here, it will depend on economic growth and further fiscal consolidation materialising.
- We are on balance bullish in our outlook for SA equities in general, based on a more constructive backdrop and still undemanding valuations.
- While longer-term (12-month) money market instruments are not paying what they used to, their yields are still high in real terms.
- At that, these instruments continue to be welcome assets to hold in our portfolios.
In our note we highlight some of what we view to be important economic, political, and financial market data – expressing our views and how we have positioned our portfolios. For our views on the global economy and financial markets, we invite you to consider our Global CIO letter. Amongst others, we take stock of the health of the US, European, and Chinese economies.
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This document is intended to provide only general information and to highlight points of interest. The information does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this document when making any investment decisions and you may wish to consult an independent professional. Our expectations and beliefs are based on reasonable assumptions within the bounds of what we currently know. Clients have an obligation to provide Stonehage Fleming with accurate information, material facts or statements and must inform Stonehage Fleming of any information relating to the client’s change in financial circumstance, investment objectives and risk profile to enable us to make the necessary adjustments.
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