Kenny Rabson, chief executive officer (CEO) of Discovery Invest

Despite heightened volatility in global markets and ongoing uncertainty surrounding the Government of National Unity (GNU), investors have compelling reasons to remain optimistic and continue investing in growth assets.

South African investors have enjoyed a bumper year so far: the stock market has soared, the rand is stronger, and inflation remains low. Yet 2025 has also brought heightened volatility in both local and global markets, leaving many investors unsure of how to interpret the mixed signals.

Kenny Rabson, chief executive officer (CEO) of Discovery Invest, says that while it’s natural for uncertainty to make investors nervous, now is not the time to abandon growth‑oriented investments. “Periods of market volatility may tempt investors to retreat from growth assets, but doing so risks missing the recovery and compounding returns that follow,” says Rabson. “It’s essential to remain focused on long‑term objectives, diversify intelligently, and not let fear dictate investment decisions.”

Markets are up, so why does the mood feel nervous?

It’s hard to get away from the bad news: escalating geopolitical tensions in the Middle East and between Russia and Ukraine, and geopolitical instability as a result of US tariff policy. And here at home, persistent bickering within the GNU. Yet, despite the turmoil, the JSE All Share Index (Alsi) was up more than 20% over the 12 months to end July (12-month return: 23,2%), breaking through the 100,000‑point mark for the first time[1]. This rally was partly driven by surging precious metal prices, which boosted the rand by around 6% against the US dollar.

Globally, the picture is more nuanced. The S&P500 is up 8,5% (in USD) since the start of the year[2], a notable underperformance compared to South Africa. This reflects a shift in global investor sentiment towards the US economy, particularly since ‘Liberation Day’ on 2 April, when the US unveiled its global tariff policy. US gross domestic product (GDP) growth is projected at just over 1% for the year[3], signalling a sluggish economy and fuelling concerns about stagflation – a combination of weak growth and rising inflation.

Is the ‘soft landing’ narrative too good to be true?

Until recently, many investment analysts were predicting some form of global recession. Those fears spiked after the US tariff announcement, with predictions placing the probability at around 60%[4]. Since then, expectations have significantly subsided, with the recession risk now at roughly 20%[5].

This shift is likely due to the US’s inconsistent stance on tariffs, particularly regarding China, and the counterbalancing influence of US monetary policy. A great deal depends on how the US Federal Reserve controls interest rates in the coming months; cutting too aggressively could risk reigniting inflation, while moving too slowly could stall growth.

While the reduction in recession risk supports the ‘soft landing’ narrative, it is far from guaranteed. The global economy remains vulnerable to policy missteps, geopolitical tensions and shifting market sentiment – any of which could derail a smooth slowdown. For now, the probability of a soft landing has improved, but it still requires careful navigation.

Where are the global opportunities now?

Near‑term earnings expectations in the US have softened slightly but remain positive. Bloomberg estimates put average US earnings‑per‑share growth rising from 10,8% to 13,4% in 2026 before moderating to 10,5% in 2027[6]. However, the best growth is expected to come from emerging markets outside Asia, where earnings are projected to rise from 13% in 2025 to 33.2% in 2027[7].

Rabson notes that while the US still offers high‑quality investment opportunities, diversification is critical. Regardless of region, a bottom‑up approach to identify strong companies remains the most effective way to navigate this environment. International investors may also benefit from diversifying currency exposure across the euro, yen and select emerging market currencies, as a stronger rand can erode offshore returns.

South Africa’s resilience

Turning to the local economy, the GNU is showing signs of progress despite political friction. Port and rail operations have improved under Transnet’s new leadership, Eskom restructuring is underway, and there’s renewed focus on upgrading municipal infrastructure.

These structural reforms are unlikely to produce a sudden growth surge but are steadily shifting the growth trajectory. However, near-term prospects have softened, with the Reserve Bank revising its 2025 growth forecast down from 1.2% to 1%.[8]

Favourable terms of trade are supporting the rand’s recent strength – our export prices have risen relative to import prices, thanks mainly to higher precious metal prices. This boost in export revenue is helping to narrow the budget deficit, and lower interest rates could provide further fiscal relief by reducing borrowing costs.

While the US’s tariffs have rattled some sectors, South Africa’s largest exports to the US, platinum group metals, remain unaffected. Only a small fraction, 4%, of agricultural exports are destined for the US[9], limiting the potential damage.

Is there still value in a slow‑growing economy?

South African equities remain attractively valued by global standards. Stable inflation and a stronger currency could further support equity and bond markets. However, after a particularly strong first half, some consolidation in local equity prices is expected in the months ahead.

This does not diminish the case for remaining invested. Instead, it highlights the need for selectivity, focusing on companies with strong fundamentals and clear growth strategies. On the fixed income side, elevated bond yields continue to offer attractive risk‑adjusted returns, especially in a stable inflation environment.

Room for optimism

The data shows a complex but hopeful picture. Global growth is slowing in the US, but improving in select emerging markets. Incremental progress on domestic structural reforms supports the rand and improves the fiscal outlook. Local assets remain attractively priced, presenting selective opportunities for long‑term investors. However, policy missteps, geopolitical tensions and swings in commodity prices remain important risks to watch.

For Rabson, the message to investors is clear: “Now is not the time to be swayed by fears of volatility. Growth assets remain a critical part of any long‑term portfolio, and history shows that stepping away during volatile periods often means missing the rebound. Staying disciplined, diversified and focused on the fundamentals will position investors to benefit when conditions turn.”

While uncertainty will always be part of the investment landscape, the combination of supportive valuations, structural reforms at home, and targeted opportunities abroad offers reasons for cautious optimism. For investors willing to look past short‑term noise, the road ahead may hold more promise than the headlines suggest.

“Discovery Life Investment Services (Pty) Ltd, branded as Discovery Invest, is an authorised financial services provider. Company registration number 2007/005969/07.”

[1] Bloomberg and Ninety One, 31 July 2025

[2] Bloomberg and Ninety One, 31 July 2025

[3] OECD Economic Outlook, 3 June 2025

[4] Polymarket, Bloomberg, 10 July 2025

[5] Polymarket, Bloomberg, 10 July 2025

[6] Bloomberg consensus expectations, Ninety One, 16 July 2025

[7] Bloomberg consensus expectations, Ninety One, 16 July 2025

[8] Reserve Bank Monetary Policy Committee statement,31 July 2025

[9] Agricultural Business Chamber, 3 June 2025

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