After strong gains in 2025, South African markets enter 2026 with increased volatility and a shift toward strategic diversification. Experts warn of fewer easy opportunities as global trends like US dollar weakness fade. Local equities and bonds may face challenges amid economic divides.
The year 2025 delivered impressive returns for South African investors, with local equities rising 37% in rands, bonds increasing 21%, and the rand strengthening over 12% against the US dollar. Gold stood out, surging more than 50%. Kyle Hulett, head of investments at Sygnia Asset Management, called it an “amazing year in terms of returns” but cautioned that “volatility is definitely back,” predicting markets will become “a lot more wobbly” in 2026.
Globally, the US continues to lead, driven by an artificial intelligence boom expected to boost GDP by 2.5% next year. Hyperscalers such as Meta, Amazon, and Oracle plan massive data center investments, totaling four times the US energy sector's capital expenditure. However, Hulett highlighted concerns over the “huge amounts of debt” these firms are taking on, while Ishreth Hassen from Foord Asset Management noted the IT sector's record-high valuations and the limits of its funding cycle.
The US dollar's 10% drop from its 2025 peak provided a tailwind for emerging markets, including South Africa, which saw 42% returns in dollar terms. Morningstar analysts Michael Dodd and Sean Neethling dubbed it a “hidden gem.” Tom Wilson of Schroders anticipates further dollar depreciation benefiting emerging market equities through easier financial conditions.
Yet optimism is tempered locally. Hulett describes an “L-shaped recovery,” citing weak productivity, fiscal issues, and low AI readiness. While business confidence rose five points late in 2025, along with an S&P credit upgrade and exit from the FATF grey list, small businesses remain vulnerable, scoring 51.50 on the Small Business Growth Index. About 67% plan price hikes, and only 38% expect to survive a year without support, per SACCI's Alan Mukoki, who calls for reduced red tape and better infrastructure.
Experts recommend balanced portfolios: Foord has raised South African equity exposure above 60%, focusing on defensive sectors like healthcare and consumer staples. Sygnia shifts to neutral on local bonds, favoring emerging market alternatives, while Morningstar suggests US small-cap and value shares over tech giants.