INVESTMENT MARKET UPDATE
MARCH 2025
What developments have unfolded in local and global markets throughout the month of MARCH?
1986
The last time gold gained 17% in one quarter
7.1%
Annual growth rate of debt servicing costs in SA
5%
EM outperformance of DM in March 2025
GLOBAL MARKET
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Q1 2025 Market Update: A Turbulent Start Amid Rising Policy Uncertainty
The first quarter of 2025 opened on a turbulent note for global markets, with heightened US policy uncertainty emerging as a key driver of volatility. The return of President Trump to the White House brought a swift and broad wave of executive actions, policy shifts, and public statements—impacting areas including trade, foreign relations, energy, and the federal workforce. Investor sentiment turned cautious, as markets grappled with the potential long-term implications of tariffs, government restructuring, and a more interventionist policy approach.
Heading into the year, the outlook had been broadly optimistic. US economic growth expectations were strong, supported by a firm US dollar, resilient labour market indicators, and solid consumer confidence. There was also cautious hope for progress in de-escalating geopolitical tensions in both the Middle East and Eastern Europe. These factors had contributed to a prevailing narrative of potential “US exceptionalism” driving global performance.
However, that narrative shifted sharply as the quarter progressed. A significant sell-off in US equities during March reflected growing unease over the evolving policy landscape. Rising inflation expectations, paired with concerns over slowing growth, led to a repricing of risk across markets. Investors, businesses, and consumers alike began adjusting to a more uncertain macroeconomic environment.
Volatility persisted across developed markets, with the MSCI World Index declining by 4.4% in US dollar terms during March. Meanwhile, geopolitical concerns resurfaced: the fragile ceasefire in Gaza collapsed violently, and US support for Ukraine appeared to wane, further unsettling global risk sentiment.
US equity markets, particularly high-growth names, bore the brunt of the downturn. The Bloomberg Magnificent 7 Total Return Index fell by 7.3% in March, bringing its year-to-date loss to 16.0%. In contrast, demand for safe-haven assets surged—gold prices hit a record high of $3,100 per ounce, delivering the strongest quarterly return for the metal since 1986.
As we move further into 2025, markets will remain closely attuned to the trajectory of US policy, geopolitical developments, and inflation dynamics—all of which will continue to shape investor expectations and asset prices.
Rand / US Dollar:
- In March, the Rand gained 0.9% against the USD, having gained 0.6% in February. Year-to-date, the Rand has gained 2.1% against the USD. The Rand is up 2.7% from a year ago to the USD.
Rand / Euro:
- In March, the Rand lost 3.5 % against the EUR, having gained 0.9% in February. Year-to-date, the Rand has lost 1.3% against the EUR. The Rand is up 3.2% from a year ago to the EUR.
Rand / British Pound:
- In March, the Rand gained 0.4% against the GBP, vs a gain in February of 0.2%.Year-to-date the Rand has gained 1.2% against the GBP. The Rand is up 0.8% from a year ago to the GBP.
ANALYTICS - COMMENTARY FOR MARCH:
SMARTIE BOX IN RANDS:
LOCAL MARKETS
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South Africa Market Update: Fiscal Policy Adjustments and Market Resilience in Q1 2025
In South Africa, investor focus in the first quarter of 2025 shifted to the evolving national budget process. The Government of National Unity (GNU) continued to manage a complex political environment, with the Democratic Alliance (DA) withholding its support for the initial budget proposal due to opposition to a proposed VAT increase. This prompted the Treasury to issue a revised draft in March.
The updated budget introduced a more measured approach to VAT adjustments—implementing a phased increase of 0.5% in both 2025 and 2026, compared to the initially proposed 2% hike. Despite these revisions, Treasury maintained its commitment to fiscal consolidation. A cornerstone of the updated budget is a R47 billion allocation over three years toward growth-enhancing infrastructure projects, underscoring a long-term strategy to stimulate economic activity while maintaining fiscal discipline.
The revised budget also forecasts a slightly higher peak in the debt-to-GDP ratio—76.2%, compared to 75.5% projected in the 2024 Medium-Term Budget Policy Statement (MTBPS)—but outlines a path to stabilisation supported by expected primary budget surpluses in the coming years.
Market reaction was broadly positive. South African equities delivered a robust performance in March, returning 3.6% in Rand terms. Gains were largely driven by the resources sector, as gold mining stocks rallied alongside a sharp rise in the global gold price. This local performance outpaced broader emerging market benchmarks, with the MSCI Emerging Markets Index rising just 0.6% in US dollar terms over the same period.
The South African Reserve Bank (SARB) held interest rates steady at 7.5% during its March Monetary Policy Committee (MPC) meeting, following three consecutive 25 basis point cuts. Notably, two of the six MPC members voted in favour of another rate cut, suggesting an ongoing debate about the appropriate path forward for monetary policy.
After an initial delay in February, Finance Minister Enoch Godongwana delivered the 2025 Budget Speech in March, formally outlining the revised VAT trajectory. The speech reaffirmed government’s focus on fiscal prudence while attempting to balance the social and political complexities of a multi-party coalition.
Looking ahead, market participants will be closely watching both the implementation of fiscal measures and the political cohesion of the GNU as key factors influencing investor confidence and economic performance.
- The JSE All Share traded sharply higher in March, up 3.6%.
- Resources (up 18.4%) bounced back in a big way from the previous month’s decline, while Industrials (down 0.3%) and Financials (up 0.2%) traded somewhat flat over the month.
- Small-caps (down 0.3%) delivered slightly negative performance, while Mid-caps (up 3.7%) and Large-caps (up 4.1%) delivered strong gains.
- SA Property had yest another volatile month, as the S&P SA REIT index (down 1.7%) dipped, and the SA Listed Property index (down 0.9%) ended slightly lower for a third consecutive month.
- SA Nominal Bonds (up 0.2%) crept higher again over the month as bond yields continued to move higher, while Inflation-Linked Bonds were flat (up 0.0%).
- Emerging Market Equities outperformed Developed Market Equities in US Dollar terms in March. The MSCI World Index dropped sharply 4.4% and the MSCI Emerging Market Index rose 0.7%.
- The rand had another mixed month. Relative to the US Dollar (Rand appreciated 1.0%), the Euro (Rand depreciated 2.9%) and the Pound Sterling (Rand depreciated 1.5%).
- Commodity prices rose across the board in March, as the Gold price surged higher up 10.1% Platinum bounced back up 8.3%) after the fall in February, and the price of Brent Crude increased by 2.1%.
MARKETS REACT TO TRUMP TARIFFS:
MONTHLY RETURNS:
