The JSE all share index is one of the best-performing stock indices in the world this year, up 33% in dollar terms year-to-date. This is consistent with what we would expect in a multipolar world, but more on that later.
The all-share rally has mostly been driven by the gold, platinum and telecommunication sectors, as well as Naspers & Prosus. Meanwhile, domestic banks and retailers have significantly underperformed the all share index and retailers are down on the year.
Why the underperformance? Most fund managers entered 2025 underweight the gold and platinum sectors, while being overweight banks and retailers post the formation of the government of national unity and the two-pot retirement funding reform.
As gold and platinum rallied, fund managers had to sell domestic stocks to fund the purchase of gold and platinum. This caused banks and retailers to underperform the index.
There are numerous reasons to be positive on domestic South African stocks. For consumers, interest rates have been cut by 150 basis points since September last year while lower petrol prices and low food inflation (except for protein) are helping low-income consumers.
Record high share prices and a strong rally in SA bonds are boosting pension values for millions of pension members. Separately, record share prices among some of the largest employers in South Africa are boosting share option gains for their employees, mostly in Gauteng, the Western Cape and KwaZulu-Natal.
Record high share prices and a strong rally in SA bonds are boosting pension values for millions of pension members.
We suspect the latter has been a part driver of exceptional vehicle sales growth in 2025. Share option gains are likely to benefit companies such as Motus, CMH and Woolworths. Record gold mining profits are also boosting spending in the mining areas of the Free State and Gauteng.
The more recent rally in platinum group metals should boost mining profits and consumption over the coming three to six months. The direct beneficiaries are the mining areas in North West, Limpopo, Mpumalanga and to a lesser extent Gauteng. This should support stocks such as Pepkor, Mr Price and Cashbuild
SA apparel retailers can source cheaper globally due to the trade war, while lower diesel costs due to the end of load-shedding and a strong rand are keeping costs in check.
On the negative side, the growth in online gambling, administered price increases well above inflation, and South African Revenue Service bracket creep are headwinds for consumption. Job creation remains weak as GDP remains far too low.
Hope for jobs market
There might, however, be hope on the horizon for the jobs market. About 60% of South African infrastructure spend is in the Western Cape. This means the rest of the country, which contributes 85% of the country’s GDP, has been in an infrastructure depression, setting up an exceptionally low base outside the Western Cape.
Construction has a high employment multiplier and there are early indications that it is turning up. The Afrimat Construction Index shows that construction sector salaries and wages ticked higher in the second quarter for the first time since 2021, and the real value of building plans passed by metros seem to be bottoming.
The government’s Budget Facility for Infrastructure (BFI) will double into the 2026/27 fiscal year from 2025, which was already a significant increase from 2024. Rand Water recently announced a R30bn infrastructure plan to build 12 reservoirs by 2028. This bodes well for cement demand and companies such as PPC and Sephaku.
A competitive municipal race in Johannesburg could spur greater accountability and the G20-related road repairs have already helped sentiment in Johannesburg. Property development in Johannesburg is rising fast off an extremely low base.
Personal income tax is growing and indicative of real wage growth, while corporate tax is boosted by record gold profits and rising platinum profits. The sharp increase in property transfers, as reflected in higher property transfer tax receipts, bodes well for home renovation and homeware sales.
The move towards a more multipolar world is supportive for emerging markets, defence & cybersecurity spending, commodities and gold.
Real Estate Investment Trusts (Reits) have rerated due to the sharp fall in bond yields, leaving some trading at premiums to net asset value. It’s highly likely they will raise capital on the JSE and use the proceeds to acquire property assets, boosting property values and thus collateral values.
There are numerous fundamental reasons to be more optimistic about domestic stocks, but they do require a flow-related catalyst. First, an upturn in domestic South Africa is likely to happen once fund managers stop selling domestic South Africa. This would require them to get to benchmark weight in platinum and gold.
Second, balanced funds could take profits after a strong bond rally and switch to domestic equities. South African retailers have not priced in the drop in the equity discount rate. And third, emerging market inflows should accelerate over time as a result of a multipolar world, as global investors diversify their massive overexposure to US equities.
The stock exchanges outside the US will do well in a multipolar world and the JSE Securities Exchange share price clearly doesn’t reflect the sharp increase in trading volumes this year. Higher equity values aid asset managers such as Coronation and insurers such as Old Mutual.
The move towards a more multipolar world is supportive for emerging markets, defence & cybersecurity spending, commodities and gold. Commodity-producing emerging markets such as South Africa should outperform emerging markets as a whole, which would in turn outperform US equities. This has indeed been the case year to date.
We believe 2026 is the year for domestic South Africa to participate.
• Van Rensburg is head of strategy at All Weather Capital.
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