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Momentum Investments’ Market review and macro-outlook summary for January 2026

South African markets delivered standout returns in 2025. This market review explains the drivers behind that performance and outlines the outlook for growth, inflation, rates and asset allocation, offering practical insights for advisers positioning portfolios for 2026.
Written by
Sanisha Packirisamy and Herman van Papendorp
Published on
January 16, 2026
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This market review unpacks why 2025 delivered exceptional returns for South African investors, and what lies ahead. With improving local growth, inflation expected to remain within target, further rate cuts on the table, and SA assets still screening attractively relative to global peers, this concise update offers valuable perspective on equities, bonds, property and cash positioning for 2026. A must-read for advisers navigating a shifting macro and market environment.

Houseview summary (Our view for the year ahead)

- Sanisha Packirisamy, Chief Economis Momentum Investments

Growth

SA’s economy is expected to have expanded by around 1.2% in 2025, with growth projected to improve further to about 1.6% in 2026, marking a steady upward trend from the 0.5% outcome recorded in 2024. Growth in household consumption should ease slightly but remain resilient, supported by firmer real wage growth, marginally better consumer sentiment, and solid wealth gains from housing and equity markets. Fixed investment is likely to pick up as energy reforms progress and logistics gradually recover. A tougher global trade environment will still weigh on exports, but overall momentum should be modestly stronger than in 2025.

Currency

The rand’s recent strength reflects firmer domestic fundamentals and ongoing terms-of-trade benefits. Improved fiscal discipline has helped restore investor confidence in SA’s policy trajectory. Moreover, the SARB’s shift to a tighter 3% inflation target has further anchored expectations and created a more predictable environment for growth. Globally, a softer US dollar amid anticipated Fed interest rate cuts, together with firm gold and platinum prices that bolster SA’s mining-driven export earnings, has added momentum. While coalition politics, in a municipal election year, together withrelatively subdued near-term growth prospects and a high debt burden still present risks, the above mentioned tailwinds position the rand favourably into 2026

Inflation

Headline inflation is expected to drift slightly higher in 2026 due to base effects. But at an expected average of around 3.5% it should remain comfortably within the new 3% target with a ±1 percentage point tolerance band, supported by an oversupplied oil market and a firmer currency containing broader price pressures. Nonetheless, upside risks persist, particularly from medical aid and administered prices, where public-service failures continue to filter through. We therefore expect inflation to hover above the target midpoint over the next two years. Although the SARB argues that better-anchored expectations will hasten disinflation, we remain cautious and view its projections as overly optimistic.

Interest Rates

While the SARB will remain cautious in assessing the lagged effects of its earlier interest rate cuts, from 8% in September 2024 to 6.75% at the November 2025 meeting, we believe it is well positioned to implement two additional 25 basis-point cuts in 2026. A benign inflation trajectory and a stable macroeconomic backdrop provide scope to support growth without compromising price stability. Moreover, the expected continuation of SA’s modest economic recovery allows further easing, while still-elevated real interest rates strengthen the case for a more accommodative policy stance.

“After a standout 2025, South African assets remain attractively positioned, but 2026 will reward disciplined asset allocation rather than blanket optimism.”

Sanisha Packirisamy and Herman van Papendorp
Momentum Investments

- Herman van Papendorp, Head of Asset Allocation, Momentum Investments

SA cash

The combination of moderately rising inflation in 2025 and 150 basis points of SARB rate cuts since September 2024 has pushed available real SA cash rates down towards their long-term average, making local cash an inferior investment alternative among the SA asset classes, in our view.

SA inflation-linked bonds (ILBs)

Although the absolute level of SA ILB yields is still high, the absence of inflationary pressures in the coming year points to a lack of fundamental support for ILBs, with no breakeven widening expected in 2026 and monthly inflation accruals predominantly low and below average in the next year.

SA equities

SA’s recent strong equity performance may help rekindle long-dormant foreign investor interest in SA equities, as has already been the case for SA bonds. An increased global allocation to EM equities could simultaneously result in material global inflows supporting SA equities, particularly given that SA is a high-beta play on EM equities. Due to strong profit momentum, SA equities remain attractively valued against global peers and its own history

Global bonds

The typical time lag between announced tariff increases and when they are finally reflected in the economy implies that the negative tariff impact on US inflation and growth should become more evident in the coming months, with potential adverse readthroughs for both US bonds.

SA nominal government bonds

The 186 basis points rally by SA nominal bonds in 2025 on the back of positive surprises from actual local inflation numbers, the introduction of a 150 basis points lower inflation target, improving fiscal numbers and a sovereign ratings upgrade has eroded the positive spread with global bonds. But the real ex-ante SA bond yield is still above historical average levels, which indicates that there is still some support for SA vanilla bonds from attractive real yields.

SA listed property

Fundamentals in the listed property space continue to improve. Companies are reporting the strongest like-for-like net operating income (NOI) growth since 2018, with the earnings recovery guided to continue in 2026. Listed property funding conditions have also improved, with funding rates now the lowest in three years. Furthermore, the sector’s balance sheet recovery remains intact due to previous asset disposals and rising asset values.

Global equities

Anticipated rising US inflation, fiscal stimulus measures, Fed rate cuts amidst a potential threat to Fed independence, together with higher and more synchronised global regional profit growth in 2026, fundamentally favour global equities over bonds. Although US equities look expensive against US bonds, they will likely remain supported as long as profit growth remains solid in a soft-landing scenario. However, the magnitude of future US equity returns should be constrained by high valuations that have little room for disappointment.

Global cash

We view global cash as a preferred fixed-income asset class, offering return potential comparable to global bonds but with lower risk and volatility, especially given the broad trend of fiscal deterioration worldwide, which is putting pressure on the long end of global yield curves.

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Momentum Wealth International Limited is licensed by the Guernsey Financial Services Commission to conduct Investment Business. Momentum Wealth International Limited is an authorised Financial Services Provider pursuant to the Financial Advisory and Intermediary Services Act No. 37 of 2002 in South Africa. Momentum Wealth is part of Momentum Metropolitan Life Limited, an authorised financial services (FSP6406) and registered credit (NCRCP173) provider.

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