Global markets navigated another week shaped by geopolitical uncertainty and shifting investor sentiment, as renewed U.S. tariff threats briefly unsettled risk appetite before attention returned to economic data and corporate earnings. A fresh round of company earnings is testing whether the AI-driven profit cycle is broadening beyond a narrow group of technology leaders, while recent geopolitical developments underscored how quickly policy uncertainty can re-emerge and influence market confidence. Although volatility proved short-lived, the episode highlighted the persistent tension between political risk and economic fundamentals that continues to define the global investment landscape.

In the United States, markets were initially rattled by an escalation in tariff rhetoric linked to President Trump’s push to acquire Greenland, triggering a sharp risk-off reaction. U.S. equities declined, the dollar weakened, Treasury yields fell and gold surged to record highs, briefly reviving the “sell America” narrative that had emerged at times in 2025. Sentiment improved later in the week after Trump softened his stance and signalled a potential framework for a deal, allowing markets to stabilise. Beneath the political headlines, economic data remained broadly resilient: real GDP growth was revised higher to an annualised 4.4% in the third quarter, core inflation held at 2.8% year-on-year, jobless claims remained near historically low levels and business activity indicators showed modest improvement. Together, these data suggest the U.S. economy continues to expand at a solid pace, even as political uncertainty injects episodic volatility.

Across Europe, the macro backdrop showed tentative improvement but remained uneven, with stabilising inflation and improving business sentiment offset by persistent structural headwinds. Eurozone inflation rose 0.2% month-on-month in December, while survey data pointed to modest expansion and stronger forward-looking confidence, particularly in Germany. However, the region’s trade surplus narrowed sharply, highlighting the ongoing drag from weak external demand and elevated global uncertainty. Overall, the data suggest that while recession risks have eased, the recovery remains fragile and heavily dependent on the global trade cycle.

In the UK, the economic picture was similarly mixed. The unemployment rate held at a five-year high of 5.1% and wage growth continued to slow, signalling a gradual cooling in the labour market, while inflation surprised slightly to the upside in December. At the same time, retail sales rebounded and consumer confidence improved modestly, indicating that household spending remains resilient despite persistent cost-of-living pressures. Against this backdrop, renewed progress on U.S.–EU trade relations helped stabilise sentiment, although ongoing political and trade tensions continue to constrain Europe’s growth outlook and leave the region highly sensitive to global policy and geopolitical developments.

In Asia, Japan experienced heightened volatility as political uncertainty and fiscal concerns weighed on markets. An early election announcement and proposals for expansionary fiscal measures raised questions about the sustainability of public finances, triggering sharp moves in long-dated government bond yields. Economic data painted a mixed picture: industrial production declined on a year-on-year basis in November, while business activity improved, with both manufacturing and services PMIs moving further into expansionary territory. Inflation moderated to 2.1% year-on-year and the Bank of Japan kept policy unchanged, maintaining a cautious stance amid rising sensitivity to bond yields and fiscal risks.

China, meanwhile, reported GDP growth of 4.5% in the fourth quarter and 5% for 2025, again meeting its official target, but underlying trends revealed a more fragile recovery. Nominal growth slowed, fixed asset investment declined for the first time in decades and retail sales remained subdued, underscoring persistent weakness in domestic demand even as industrial output strengthened.

Global equity markets ended the week slightly lower, reflecting a broadly cautious risk environment. The Dow Jones fell 0.53%, the S&P 500 eased 0.35% and the Nasdaq slipped 0.06%. European equities underperformed, with the Euro Stoxx 50 down 1.35% and the FTSE 100 declining 0.90%. In Asia, market performance was mixed: Japan’s Nikkei 225 and Hong Kong’s Hang Seng recorded small losses, while Chinese equities outperformed, with the Shanghai Composite rising 0.84%. Bond markets were relatively stable overall, while commodities strengthened, led by a sharp rally in gold and a solid rise in oil prices. Bitcoin declined over the week but remains modestly higher on a year-to-date basis.

Market Moves of the Week:

The South African rand strengthened over the week, closing near R16.10/$ as markets positioned ahead of the upcoming interest rate decision and continued to price in supportive global and domestic dynamics. The currency remains close to its strongest levels since mid-2022, underpinned by record-high gold prices, improved fiscal metrics, a credible monetary policy framework and a softer U.S. dollar. The rand has gained more than 2% against the dollar since the start of 2026, with further upside possible should commodity prices remain firm and global risk sentiment stay supportive. However, structural constraints, including weak domestic growth prospects and the currency’s inherent volatility, suggest that recent gains remain vulnerable to shifts in global conditions.

On the macro front, inflation remains well contained, reinforcing expectations that monetary conditions could gradually ease in the year ahead. Consumer inflation rose 0.2% month-on-month in December, following a decline in the previous month, while headline CPI increased to 3.6% year-on-year from 3.5%, remaining within the Reserve Bank’s target range. Domestic data painted a mixed picture: retail sales rose 0.6% month-on-month in November and accelerated to 3.5% year-on-year, signalling resilient consumer activity, while mining production deteriorated, falling 5.9% month-on-month and declining 2.7% year-on-year, marking a sharp reversal from the prior month’s gains. Overall, South Africa’s macro environment reflects a cautiously improving inflation backdrop and resilient consumption, tempered by ongoing weakness in the mining sector and a still subdued growth outlook.

Local equities advanced over the week, with the JSE All Share Index rising 1.76%, supported by a strong rebound in resource stocks (+7.16%) and solid gains in financials (+1.18%), while listed property also advanced (+0.75%). Industrials lagged the broader market, declining 3.02%. The rand strengthened against the U.S. dollar to around 16.10, while the 10-year South African government bond yield declined to 8.15%, reflecting improved sentiment in local fixed income markets.

Chart of the Week:

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Global equity markets delivered mixed performances over the week, with small-cap and value stocks extending their year-to-date outperformance relative to large-cap and growth-oriented shares. The start of the fourth-quarter earnings season in the US set the tone, particularly within the financial sector, where results and market reactions varied.

Several major US banks reported earnings during the week. JPMorgan Chase and Citigroup shares declined after both institutions posted lower quarterly profits, while Morgan Stanley and Goldman Sachs advanced, supported by results that broadly exceeded market expectations. Technology shares provided some support to broader markets, led by the semiconductor sector. Taiwan Semiconductor, Nvidia, Micron and peers rallied on strong earnings updates, continued AI-driven optimism, and news of a US–Taiwan trade agreement committing approximately USD 250 billion toward US-based semiconductor manufacturing.

Outside of precious metals, markets were notably calm despite heightened political uncertainty in the United States. Late Sunday, news emerged that Federal Reserve Chair Jerome Powell was under investigation by the US Department of Justice regarding testimony on cost overruns related to the Federal Reserve’s headquarters renovation. Powell pushed back strongly, characterising the investigation as politically motivated amid renewed pressure from President Donald Trump to accelerate interest rate cuts and challenge central bank independence. Market reaction, however, remained muted.

On the macroeconomic front, US inflation data surprised modestly to the downside. Core CPI rose 0.2% month-on-month and 2.6% year-on-year in December, below consensus expectations. Headline CPI increased 0.3% month-on-month and remained steady at 2.7% year-on-year, easing concerns that prior methodological adjustments would lead to a renewed acceleration in inflation.

For the week, US equity indices ended lower, with the S&P 500 down 0.4%, the Dow Jones Industrial Average declining 0.3%, and the Nasdaq Composite falling 0.7%.

Geopolitical developments also came into focus. Widespread protests in Iran prompted President Trump early in the week to suggest possible US military action, warning that Iran was approaching a “red line.” He simultaneously signalled support for protesters and began withdrawing US troops from select Middle Eastern bases. By midweek, the tone softened as the administration indicated assurances had been received that executions would halt and violence against protesters would subside.

In Europe, markets were more constructive. The STOXX Europe 50 Index gained 0.53%, supported by resilient economic data and earnings. Germany recorded its first annual economic growth in three years, with GDP expanding 0.2% in the fourth quarter and for the full year. The Bundesbank forecasts growth of 0.6% in 2026, driven by increased defence and infrastructure spending. In the UK, GDP grew 0.3% month-on-month in November, exceeding expectations, with services, production and manufacturing contributing positively. The FTSE 100 rose 1.09% for the week.

Asian markets were mixed. Japanese equities rallied sharply, with the Nikkei 225 Index gaining 3.84% and hovering near record highs. Optimism was underpinned by reports that Prime Minister Sanae Takaichi may call a snap general election, potentially strengthening political stability. In contrast, mainland Chinese markets declined after regulators tightened margin financing rules for domestic investors. Economic data showed exports rising 6.6% in December and a record USD 1.2 trillion trade surplus for 2025. The Shanghai Composite fell 0.45%, while Hong Kong’s Hang Seng Index rose 2.25%.

Commodity markets reflected ongoing geopolitical uncertainty. Brent crude oil rose 1.6% on the week, settling near USD 64 per barrel after a volatile period marked by concerns over Iranian supply disruptions. Prices eased later in the week as the likelihood of immediate US military intervention diminished, despite a continued build-up of US forces in the region. Gold prices were volatile, but still recorded a weekly gain of approximately 2%, after reaching a record high midweek. Safe-haven demand moderated as geopolitical tensions eased and expectations for near-term US rate cuts continued to fade.

The coming week will feature a busy US economic calendar, as agencies catch up following the government shutdown. Key releases include personal income and spending data, PCE inflation measures, and another estimate of third-quarter GDP. Leading indicators such as S&P PMIs and the University of Michigan consumer sentiment survey will also be closely watched. Internationally, PMIs will be released across the Eurozone, UK, Japan, Australia and India. The UK will publish inflation, labour market and retail sales data, while China’s final GDP print for the year and the Bank of Japan’s monetary policy decision will be key focal points for Asian markets.

Market Moves of the Week:

The South African rand weakened modestly on Friday, as market participants positioned ahead of next week’s inflation release, which is expected to provide further insight into the health of Africa’s most industrialised economy and the South African Reserve Bank’s (SARB) interest rate trajectory for the year ahead.
 
Inflation eased for the first time in three months in November, slowing to 3.5% year-on-year and remaining comfortably within the SARB’s 3% target band. At its most recent policy meeting, the central bank cut the repo rate by 25 basis points to 6.75% in a unanimous decision, noting that an improved inflation outlook had created scope for a less restrictive policy stance.
 
Looking ahead, a further rate cut at the end of January is increasingly likely, supported by subdued inflation dynamics and the continued resilience of the rand amid a weaker US dollar. A further 25 basis point reduction would lower the repo rate to 6.50%, bringing the prime lending rate down to 10%. Such a move would provide additional relief to indebted consumers and enhance the domestic economy’s resilience against ongoing global uncertainty.
 
Equity markets responded positively over the week. The FTSE/JSE All Share Index advanced 1.74%, led by strong gains in resource stocks, reflecting firmer commodity prices and renewed investor appetite for mining counters.

Chart of the Week:

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US markets began the year on a confident footing. The Dow Jones rose 2.32% over the week, while the S&P 500 gained 1.57% and the Nasdaq advanced 1.88%. This was not just a technology-driven rally. Smaller companies and value-oriented shares outperformed, which signals growing confidence in the broader economy. Beneath the market strength, the economic data was more nuanced. Job growth slowed sharply in December and prior months were revised lower, confirming that the labour market is cooling. Job openings also declined, which points to easing demand for workers. Manufacturing remains under pressure, with activity still contracting, but the services sector continues to show resilience and even signs of improvement.

European equities built on improving sentiment this week. The Euro Stoxx 50 rose 2.51% and the FTSE 100 gained 1.74%, reflecting growing optimism that the region may be stabilising after a difficult period.

Economic data helped support this view. Industrial production and manufacturing orders in Germany surprised positively, while retail sales across the eurozone also exceeded expectations. Inflation eased to 2.0%, which is exactly in line with the European Central Bank’s target and a welcome development for consumers and businesses.

That said, the outlook is not without risks. Services inflation remains elevated, which means interest rates are likely to stay higher for longer. In the UK, housing data showed ongoing softness, with mortgage approvals slipping and house prices falling again in December. This continues to weigh on household confidence. Overall, Europe is showing signs of progress, but the recovery remains uneven. Market returns this week reflect cautious optimism rather than full conviction.

China delivered a split performance this week. The Shanghai Composite rose 3.82%, driven by enthusiasm around artificial intelligence and domestic technology stocks, while Hong Kong’s Hang Seng declined 0.39%, highlighting the uneven nature of investor sentiment.

Trading activity in mainland markets has increased sharply and retail participation remains elevated, which reflects strong speculative interest in selected sectors. However, the economic backdrop remains fragile. Consumer inflation has improved modestly, but producer prices are still falling year on year, which continues to pressure corporate profitability.

China remains heavily dependent on policy support. Investors are watching closely for further stimulus measures in 2026, as additional easing could meaningfully influence both economic growth and market performance.

This remains a market with significant upside potential, but also elevated risk, which reinforces the importance of maintaining balanced exposure.

Japan was one of the strongest performers globally this week. The Nikkei 225 rose 3.18%, supported by strong gains in technology shares and a weaker yen, which benefits export-oriented companies.

Encouragingly, the economic backdrop is also improving. Household spending rebounded strongly in November, driven by higher spending on vehicles and everyday consumption such as food and dining. This suggests that Japanese consumers are becoming more confident again, even though real wages remain under pressure. The Bank of Japan continues to signal that interest rates may rise gradually during 2026 as inflation and growth become more sustainable. Markets appear comfortable with this path, viewing it as a sign of economic normalisation rather than a threat to growth.

Market Moves of the Week:

Local markets posted positive returns over the week. The JSE All Share gained 1.74%, with resources performing particularly well as the Resources 10 Index rose 3.86%. Financials gained 1.06%, industrial shares rose 0.49%, and listed property advanced 1.89%.

Despite the positive market performance, the economic data continues to paint a challenging picture. The Absa Purchasing Managers’ Index fell to 40.5 in December, the weakest reading since the lockdown period. This confirms that South Africa’s manufacturing sector remains in contraction and under significant strain.

The weakness was driven by falling employment and declining inventories, both of which signal soft demand conditions. While business activity showed some improvement, economists broadly agree that manufacturing is likely to drag on growth into 2026. GDP growth expectations remain subdued at around 1.0% to 1.3%.

There was, however, one encouraging signal. Business expectations for the next six months improved sharply, suggesting that confidence could recover if conditions stabilise and operational challenges ease.

For investors, this reinforces the importance of maintaining offshore diversification while selectively taking advantage of opportunities within the local market.

Chart of the Week:

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As we kick off 2026, we’d like to wish you a happy, healthy and prosperous year ahead. As always, we remain focused on helping investors navigate an evolving global landscape with discipline, perspective and a long-term mindset.

2025 reinforced an important lesson for investors: portfolios are rarely rewarded for reacting to political noise. Despite an almost constant stream of policy headlines, markets delivered robust returns, underscoring the value of staying invested and focused on fundamentals. Below, we highlight some of the key themes that shaped the year.

Key themes that shaped 2025

• Markets outperformed despite political noise: Strong returns across asset classes reinforced the importance of avoiding politically driven investment decisions.
• AI moved from promise to dominance: Breakthroughs in artificial intelligence reshaped industries, accelerated capital investment and emerged as a defining structural theme, with regulation lagging innovation.
• Trade tensions resurfaced: Aggressive tariff rhetoric, particularly between the U.S. and China, contributed to episodic volatility, despite temporary truces limiting near-term disruption.
• Geopolitical risks remained elevated: Conflicts across multiple regions heightened global uncertainty and influenced energy markets and investor sentiment.
• Volatility returned to markets: Global equities swung between a sharp pullback and record highs as technology shocks, trade risks and central bank uncertainty collided.
• Consumers showed selective resilience: Spending on entertainment and leisure remained firm despite tighter financial conditions.
• Climate risks moved into sharper focus: Extreme weather events highlighted growing economic, insurance and infrastructure risks.
• Property affordability deteriorated: Housing and rental markets continued to reprice higher globally, intensifying affordability pressures amid structural supply constraints and the lagged impact of higher interest rates.

U.S. economic data over the holiday-shortened week presented a mixed but broadly constructive picture. Housing activity showed tentative signs of recovery, with pending home sales posting their strongest monthly gain since early 2023 as easing mortgage rates and solid wage growth improved affordability. House prices rebounded modestly in October, while year-on-year gains remained contained, suggesting price pressures are cooling rather than accelerating. Mortgage rates fell for a third consecutive week, ending 2025 at their lowest level of the year and beginning to draw buyers back after a subdued housing market.

Monetary policy remained a central focus following the release of minutes from the Federal Reserve’s December meeting. While the Fed delivered a 25 basis-point rate cut, policymakers struck a cautious tone, emphasising the need to balance easing inflation against lingering upside risks to prices and growing downside risks to employment. Markets reacted calmly, with investors continuing to price in a low probability of near-term rate cuts as the Fed maintains a data-dependent, wait-and-see approach.

Labour market signals were less clear-cut. Initial jobless claims fell to one of the lowest levels of the year, although seasonal distortions around the holidays likely contributed to volatility. Continuing claims also edged lower, pointing to limited immediate deterioration, even as broader indicators suggest hiring momentum has slowed through 2025 and the unemployment rate has risen to a four-year high. Manufacturing data echoed this late-cycle dynamic, with pockets of improvement in regional surveys offset by ongoing weakness in parts of the industrial sector.

Across Europe, data pointed to a gradual cooling in economic momentum. Spanish inflation eased further in December, driven by lower fuel prices, although core inflation remained sticky, reflecting persistent services pressures. France saw a modest improvement in registered unemployment on a month-on-month basis, but joblessness remains materially higher than a year ago. In the UK, house prices unexpectedly declined, highlighting ongoing affordability constraints, while Sweden’s central bank signalled a prolonged pause in policy rates through 2026 as it waits for inflation to normalise more convincingly.

In Asia, Japan and China offered contrasting signals. The Japanese yen remained under pressure near multi-year lows, fuelling speculation around potential official intervention, while government bond yields climbed to their highest levels since the late 1990s on expectations of gradual policy normalisation. In China, manufacturing activity stabilised, with the official PMI returning to expansion territory for the first time in eight months. While the improvement was modest, it supports expectations of a measured policy approach in 2026, complemented by longer-term initiatives such as Beijing’s new national venture capital fund aimed at fostering domestic innovation and technological self-sufficiency.

Market Moves of the Week:

Global markets delivered a strong but increasingly differentiated performance in 2025, with equity returns broadening beyond the dominant U.S. technology trade. U.S. equities posted solid double-digit gains, led by the Nasdaq (+20.4%) and supported by a resilient S&P 500 (+16.4%), despite choppier conditions into year-end. Outside the U.S., returns were equally compelling: Japan’s Nikkei 225 surged 26.2% on improved corporate governance and yen dynamics, European equities ended the year firmly higher (Euro Stoxx 50 +18.3%, FTSE 100 +21.5%), while China and Hong Kong rebounded meaningfully after a weak start to the year. Bond markets reflected shifting monetary dynamics, with U.S. and UK 10-year yields ending the year modestly lower, German yields higher, and Japan’s 10-year yield rising sharply as expectations of policy normalisation intensified.

South African markets were standout performers in 2025, underpinned by a powerful recovery in resources and improved global risk sentiment. The JSE All Share Index rose 37.7% for the year, driven by an exceptional 138.2% gain in the Resource 10 index, while financials (+20.7%) and industrials (+16.7%) also delivered solid returns. Listed property rebounded strongly, ending the year up 30.5% despite some volatility in December. Commodities were mixed, with gold emerging as a clear winner (+65.0%) amid persistent geopolitical uncertainty and strong central bank demand, while Brent crude declined sharply (-18.5%) on supply dynamics and slower global growth. The rand strengthened materially over the year, with USD/ZAR appreciating 12.1% in favour of the currency, supported by improved sentiment and a softer U.S. dollar, while South Africa’s 10-year bond yield declined 82 basis points, reflecting easing inflation pressures and improved fiscal and policy credibility.

Chart of the Week:

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