Foord Asset Management sizes up the forces set to sway markets next year

Markets have spent much of 2025 rising with pockets of speculation emerging across asset classes. Asset prices almost everywhere - from Wall Street to Sandton - have floated higher on a breeze of optimism and a weaker dollar. As we approach a pivotal year for global growth, inflation, and monetary policy, Foord Asset Management reflects on what may matter most in the year ahead.

Four themes stand out: shifting macro currents, the search for value beyond America, the limits of the big-tech boom, and the underappreciated charms of South African equities.

Macro shifts: currencies, bonds and a delicate South African balance

Rashaad Tayob, Portfolio Manager, believes the broad-based rally across almost all major asset classes, both globally and locally, has been heavily influenced by the weaker dollar, which has fallen roughly 10% from its peak. He cautions, however, that investors should not bet on a repeat performance as 2026 will prove difficult for the dollar to decline and provide the same boost to asset markets that it did in 2025.

South Africa, he says entered 2025 in a macro ‘sweet spot’ of high gold prices, low oil prices and muted inflation – with a low inflation target as a result – but warns of some key challenges going forward. The first is implementing the new inflation target; the second stabilising government debt; and the third maintaining the ANC-DA coalition in the form of the GNU.

Against this backdrop Foord favours inflation-linked bonds, where real income remains attractive, and domestically oriented shares, which have yet to fully reflect the recovery narrative, animating global markets.

Global equities: Going beyond the US

JC Xue, Portfolio Manager, favours a more balanced allocation to equities across Asia, Europe and America in the Foord Global Equity Fund — with roughly a one-third allocation to each region — which is quite a departure from the fund’s US-heavy benchmark.

Valuations in the US have once again drifted into territory best described as exuberant, while markets in Europe and parts of Asia still trade on more realistic expectations. In these regions Foord invests in businesses with robust prospects yet unencumbered by the assumptions now embedded in many American share prices.

Technology: a narrow boom meets practical limits

Ishreth Hassen, Portfolio Manager, notes that the US tech stock sector has swollen to dominate indices in a way that leaves little margin for disappointment. A handful of giants – the Magnificent Seven – now exert more influence than entire industries once did.

After almost two decades of outperformance, the IT sector is the most expensive it's ever been and constitutes almost half the S&P 500 today, compared to less than a fifth in 2013.

Yet the drivers of this long boom look less convincing than before. Digital advertising, once the boundless engine of growth, is in maturity. The cloud-computing race is becoming more contested. And the funding loop that propels the artificial-intelligence gold rush – advertising revenues feeding enormous capital spending –is not infinite.

There are exceptions. Xue argues that Google remains oddly mispriced for a company whose products – Search, YouTube, Gmail, Maps, Chrome and more – form part of the daily routine of billions. With investors paying extravagantly elsewhere for the promise of AI-driven riches, Google’s more modest valuation looks almost contrarian.

South Africa Inc: value hiding in plain sight

Closer to home, investment sentiment towards South African bonds has improved, with the bond market rallying, However, the country’s domestically focused companies have not yet attracted similar interest. Chief Investment Officer, Nick Balkin believes the ratings gap is unwarranted. Some locally listed firms, he says, trade at discounts so wide that a meaningful re-rating seems likely as confidence rebuilds.

More importantly, a cluster of dependable companies in healthcare, basic consumer goods and everyday banking, can deliver respectable returns through the simple combination of steady dividends and incremental earnings growth. These are not heroic turnarounds or speculative fads; they are businesses that feed, clothe, heal and bank the public.

Foord has accordingly lifted its domestically focused share weighting above 60% in the South African-only Foord Equity Fund, deploying cash held aside through the local election season and trimming investments in overseas companies listed locally. For Balkin, companies with sound fundamentals and sensible prices remain the most reliable hunting ground for long-term, inflation-beating returns.