Newsletter | May 2025 | Once Again, Volatility Blinked and Fear Lost.

Chaos to Clarity: Staying Calm Paid Off

Our April newsletter spoke about embracing the chaos, not avoiding it. The markets were noisy, sentiment was shaky, and headlines did their best to spook even the most seasoned investors. There is still a lot of uncertainty, especially when it comes to policy, particularly with the United States’ application of new tariffs. But the picture is clear: volatility has passed for now, and those who didn’t flinch are better for it. The chaos didn’t win. Fear didn’t either. What did win? A steady hand and a long-term view. 

The numbers looked substantial, but long-term investors assessed them in relative terms. At the close of 8 April, the Nasdaq Index was down 16% year-to-date, while the S&P 500 Index was down 12%. The MSCI Emerging Markets Index was down 3% at that same point, while the MSCI World Index was down 9%. These indices have substantially recovered since that drawdown, with the Nasdaq now down only 8%, the S&P 500 down 6%, and the MSCI World Index down 2%, all year-to-date. The MSCI Emerging Markets Index has gone from negative to positive, up 3% by end April 2025. 

Why Stay Invested?

While owning the market is important, investing using vanilla index tracking funds proves to be more powerful when you stay invested, instead of moving in and out when frightened by market volatility. The chart below illustrates the power of compounding through the years, by staying by having broad market exposure and remaining invested. The graph shows rolling monthly returns of the FTSE/JSE All Share Index (ALSI), over 12-, 24-, 36- and 60-month periods. 
 

The chart above illustrates that over shorter periods there is higher volatility, and there are periods when assets are below zero. But as the period spent in an investment increases, compounding returns allow investors to see better results, as indicated by the five-year dots, which barely get to the zero line. When calculating rolling total returns of the ALSI from 2001, 85.6% of the time, the observations were positive. Over two-year periods, there were 90.4% positive returns, over three years 99.26% positive returns, and over five years the positive return ratio increased to 99.59%.

The chart shows that while the stock market may feel chaotic in the short term, history rewards patience. The longer you stay invested, the more predictable and positive your returns become. Trying to jump in and out, to time the market, based on short-term movements can be costly. But staying the course, even during the rough patches, gives your investments the chance to grow, recover, and compound over time.

What Else is Happening 

In April, the US posted its GDP numbers, indicating that its markets were down 0.3% over the first quarter. The US has not contracted in GDP numbers since 2022, but despite that, the major indices across the globe were still resilient, though markets were down on the day the numbers were released. US companies released strong earnings reports, with tech giants like Microsoft aiding the rebound of the Nasdaq Index.

In Europe, the DAX was boosted by a proposed US$535 billion infrastructure fund from the German government, as European markets faced retaliatory tariffs from the US. 
Where the trade tariff tensions were really felt was in the Asian markets, with Japan’s Nikkei and China’s Shanghai Composites both down over 5%, while Hong Kong’s Hang Seng Index fell more than 10% earlier in April. 

Markets in April

In rand terms, the Nasdaq Index ended the month up 2.7%, while the MSCI World Index was up 2.1%, and the S&P 500 Index was up 0.5%. In contrast, the MSCI China Index posted a drop of 3.2%, while the MSCI India Index continued on its strong rebound, returning 6.0% for the month. The broader MSCI Emerging Markets Index was up 2.5%. Meanwhile, the MSCI UK Index and MSCI Euro Index were up 3.9% and 0.6%, respectively.

Locally, Property stocks had the strongest sector performance, up 7.6% for the month, followed by the Industrials sector, which was up 5.0%, and Financials were up 4.7%. Resource stocks continued with their gains, with the index up 2.4% for the month. The FTSE/JSE All Share Index closed the month up 4.3%, and the FTSE/JSE Top 40 Index was up 4.5%.

On a year-to-date basis, Cash is doing better than local nominal bonds, but for April, the JSE All Bond Index was up 0.8% while the STeFI was up 0.6%. The rand depreciated by 1.2%, ending at R18.61 to the US dollar, R21.15 to the euro and R24.85 against the pound.

Disclosure

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