Newsletter | September 2025 | Seeding Opportunities, Pruning Risks

Spring is Here.

The new season brings renewal and fresh growth, and on an annual basis, we like to remind you that it might also be an opportune time to revisit your portfolio. The revisit offers an opportunity to consider planting new opportunities where conditions are fertile, and to potentially prune risks that may hinder growth. It is not the time to try and time the market, but just in case you haven’t looked at your portfolio in a while, this might be the time to check for gloom or bloom.

August: A shift in the Weather

To everyone’s surprise, US Federal Reserve (US Fed) Chair Jerome Powell turned more dovish on 22 August when he made his speech at Jackson Hole, leaving the door open for a possible September rate cut despite the sticky inflation. The US Fed has a dual mandate: to stabilise prices by targeting 2% inflation, and then to foster conditions that support job growth (maximum sustainable employment) but not allow the economy to have runaway inflation. The expectation was for Powell to highlight the inflation risk, but he downplayed it, highlighting rising labour-market risks, which caused a storm on the Friday afternoon. 

Because of this shift, the US Small-Caps proved to be the bloom amongst the doom of market volatility in the month of August, with the Russell 2000 Index returning 4.7% while the Nasdaq 100 Index was down 1.3% and the S&P 500 Index down 0.2% in rand terms, during the month. 

It may be spring now in South Africa, but the Northern Hemisphere is entering its fall (autumn) season, and markets have been choppy. In rand terms, the MSCI India Index was down 5.2% for the month, the MSCI USA Index was down 0.3%, and the MSCI Emerging Markets Index was down 0.9%. The MSCI UK Index eked out a second straight monthly gain, up 1.4% after being up 2.6% the previous month, while the MSCI Euro Index was up 1.2%. Japanese government bonds sold off, with their 10-Year and 30-Year yields at 1.6% and 3.2% respectively, a two-decade all-time high. 

Nurturing Diversification

A healthy garden thrives on variety, and so do portfolios. Balancing equities, bonds, and other asset classes can reduce vulnerability to sudden shocks. This is also an opportunity for investors to be mindful of possible weeds in their portfolio and other factors that could influence the investment outcome. Amongst the blooms and the beauty of spring, the current possible policy weeds are the US government tariff calls, which are now in contest as the US appeals court found them to be illegal. This is worth monitoring, as tariffs have been the biggest influence in market movements this year. 

Spreading exposure across regions and sectors helps capture new growth opportunities while containing concentrated risks. This can be seen in the large dispersion in returns from different regions and sectors in August:  the Bloomberg Global Aggregate Index was down 0.7% while the local All Bond Index was up 0.8%, the local Resource index was up 12%, for the month while Industrials and Financials were up a mere 1.0% each for the month.

Watching the Weather

Every season carries its own uncertainty, so staying alert to risks is key. In as much as spring can bring sunshine in September, the month tends to lag other months when it comes to historical equity returns. The graph below shows the returns of the S&P 500 Index since 1985:

In markets, risks can choke returns if left unmanaged, just as weeds can ruin your backyard if left unchecked. The local equity and bond markets have been strong this year, but domestic challenges in South Africa, like business confidence and fiscal risks, could temper local growth despite favourable global tides. The surge in Japan’s yields could spread into other global markets, which could breed further uncertainty and volatility in the market.

Technology and innovation remain fertile soil, but diversification captures the broader market environment. Locally, South African equities are at record highs, but it’s worth checking if gains are concentrated in a few names or broadly supported. 

Disclosure

_{Satrix Investments (Pty) Ltd is an approved FSP in term of the Financial Advisory and Intermediary Services Act (FAIS). The information does not constitute advice as contemplated in FAIS. Use or rely on this information at your own risk. Consult your Financial Adviser before making an investment decision.}

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