How investment markets fared over the 2nd quarter

By Martin Hesse

In the second quarter of 2026, global and local investment markets continued to be dominated by the Iran War, although the effects were less dramatic than in the first quarter owing to a de-escalation of hostilities and fragile truce that calmed oil prices.

Pressure on the resources sector kept the local equity market subdued: the FTSE/JSE All-Share Index (Alsi) drifted downwards from 114 067 to 110 313 points between March 31 and June 30. According to the Corion Report, which uses data from Morningstar, the total-return version of the Alsi dropped 2.4% over the quarter. However, its year-on-year performance remains strong. Thanks to the strong resources boom in the second half of 2025 up until the Iran War erupted on February 28, the Alsi was up 18.4% over the 12 months to the end of June.

Inflation is still a concern, both here and in the United States. The latest local year-on-year CPI figure, for May, is 4.5%, the highest since July 2024, while the US is not far behind, at 4.2% in May.

Reacting to the tense geopolitical environment and rising inflation, the SA Reserve Bank raised interest rates by 0.25% in May in what Reza Hendrickse, portfolio manager at PPS Investments, calls a “defensive move, rather than the start of a rate-raising cycle”. This is in contrast to the US, where the new Federal Reserve chairman, Kevin Warsh, held rates steady.

Hendrickse also welcomed the announcement by credit rating agency Fitch to upgrade South Africa’s sovereign rating to BB from BB- on 5 June. “Coming just seven months after S&P’s upgrade, two of the three major agencies have now moved in South Africa’s favour within a year, some welcome local news in a quarter otherwise dominated by global shocks,” he says.

Despite the uncertainty and the weaker equity market, there is a sense that the South African economy is faring relatively well under the circumstances. In an opinion piece for Moneyweb, Busi Mavuso, CEO of Business Leadership South Africa, says our economy proved more resilient during the Iran War than during past crises such as the Covid-19 pandemic and the start of the Ukraine War.

“The resilience shown by the South African economy has been impressive in relation to most economies, with the rand holding up far better than it has during past global shocks. This is a direct result of a deliberate build-up of policy credibility, including a lower inflation target, a primary budget surplus that has been widening since 2023/24 after 15 years of deficits, and a planned fiscal trajectory that will see government debt peak at 78.9% of GDP this year before falling towards 75% by the end of the decade,” Mavuso says.

Overseas equity markets, and in particular the US market, also surprised to the upside. Herman van Papendorp, head of asset allocation at Momentum Investments, notes: “Global equity markets have demonstrated notable resilience in 2026, despite geopolitical disruptions such as the escalation of the Iran conflict. The initial sell-off following the conflict was rapidly reversed, largely due to exceptionally strong US earnings growth and broad-based upward revisions to profit expectations.”

Global equities, as measured by the MSCI World Index, was a top-performing asset class over the quarter, rising 9.1% in rand terms. Local bonds (according to the All Bond Index) also showed strong returns (7.9% for the quarter, and 21.5% for the 12 months). The standout performer, however, over both the 3-month and 12-month periods, was listed property (10.0% and 29.7% respectively, according to the SA Listed Property Index).

The most popular unit trust fund categories, according to the Corion Report, fared as follows over the 12 months to the end of June: