Monthly Market Review
February 2025
Global markets in February remained steady, reflecting mixed economic signals across regions. The U.S. bond market saw declining yields, while European equities posted solid gains. In South Africa, the equity market showed resilience, with specific sectors outperforming despite ongoing challenges. Inflation remained a key concern worldwide, intensified by President Trump’s proposed tariff policies, which added uncertainty to global trade.
LOCAL MARKETS
Exhibit 1 | Local performance (ZAR) for February 2025
Source: Factset. Data as at 28 February 2025. Past performance is not indicative of future performance. For illustrative purposes only and not indicative of any investment.
South Africa
Economy
The 2025 budget announcement was delayed to March due to disagreements on VAT policy within the Government of National Unity (GNU). The proposed 2% VAT hike (from 15% to 17%) is aimed at fiscal consolidation, but uncertainty surrounding its implementation has weighed on investor sentiment.
Inflation ticked up to 3.2% year-on-year, aligning with market expectations, though still below the SARB’s 4.5% target midpoint.
Load-shedding briefly returned due to multiple power generation failures, raising concerns over economic stability.
Equity Markets
The JSE All Share Index (ALSI) remained relatively unchanged, while the JSE Capped SWIX declined slightly
(-0.38%).
Sector performance:
The Resources Index (RESI10), which tracks the 10 largest mining and resource companies on the JSE, fell sharply (-6.17 %) after strong gains in January. This decline was driven by weaker prices for key commodities like iron ore and platinum, which negatively impacted major mining stocks.
The Industrial Index (INDI25), gained (+3.40%), driven by industrials and technology stocks.
The Financial Index (FINI15), made up of the biggest banks and financial companies, posted a modest gain of +0.82%, showing resilience despite economic uncertainty.
Top Performers for the month
- Anheuser-Busch InBev SA/NV: 21.56%
- Discovery Limited: 14.93%
- OUTsurance Group Limited: 13.84%
Bottom Performers for the month
- Northam Platinum Holdings Limited: -23.18%
- Sibanye Stillwater Limited: -21.37%
- Harmony Gold Mining Co. Ltd.: – 15.49%
Bond Markets
The South African government’s 10-year borrowing cost rose to 10.5% per year, even though global interest rates were generally lower. This was due to investor caution and geopolitical uncertainty.
The yield on the R2030 bond rose by 8.8%, while the R2048 bond increased by 10.6%. The All-Bond Index (ALBI) remained mostly unchanged, as gains in shorter-term bonds were offset by weakness in longer-term bonds. Inflation-linked bonds delivered a 1.0% return.
GLOBAL MARKETS
Exhibit 2 | Global performance (base currency) for February 2025
Source: Factset. Data as at 28 February 2025. Past performance is not indicative of future performance. For illustrative purposes only and not indicative of any investment.
United States
U.S. financial markets faced a challenging month as investors reacted to economic uncertainty, shifting interest rate expectations, and geopolitical concerns. The Federal Reserve (Fed) signalled that rate cuts were not imminent, which kept borrowing costs elevated. However, bond yields declined slightly, with the 10-year Treasury yield falling 0.3% to 4.21%. Broader economic data also weighed on sentiment. Consumer confidence saw its sharpest decline in over three years, and jobless claims rose, raising concerns about slowing economic momentum. Inflation remained above the Fed’s 2% target, with the core PCE price index increasing 2.6% year-on-year, reinforcing expectations that interest rates may stay high for longer. Equity markets struggled, with the tech-focused NASDAQ 100 declining 2.69%, the Dow Jones falling 1.39%, and the S&P 500 dropping 1.3% as investors reacted to economic uncertainty.
United Kingdom
The UK equity market continued its recovery, with the FTSE 100 rising 1.99% in February, despite ongoing economic uncertainty. The government borrowed more money during the month, leading Chancellor Rachel Reeves to reaffirm her plans to invest in major infrastructure projects, including expanding Heathrow and Gatwick airports. The labour market showed mixed signals, with wage growth rising 6% in the three months to November 2024. However, unemployment increased to 4.4%, and payroll employment recorded its sharpest decline since November 2020, raising concerns about job security as the UK heads further into 2025.
Europe
European markets posted solid gains in February, with Germany’s DAX leading the way, rising 3.77%, while the Euro Stoxx gained 3.24%. Investors remained hopeful that interest rate cuts could be on the horizon, but the European Central Bank (ECB) is taking a cautious approach, keeping a close watch on inflation.
Asia
Asian stock markets had a mixed month in February. China performed well, with the Hang Seng soaring 13.43% and the Shanghai Composite rising 2.162%. The CSI 300 (which tracks China’s 300 biggest companies) gained 1.91%, boosted by stronger performances in industrial and technology stocks. In contrast, Japan’s Nikkei 225 dropped sharply by 6.05%, as monetary policy adjustments weighed on market confidence.
Fixed income and currencies
Bond yields fell globally in February and investor expectations around interest rates shifted, leading to lower bond yields. In the U.S., the yield on the key 10-year Treasury bond dropped by 0.33% to 4.21%, as markets anticipated possible rate cuts later in 2025. A similar trend played out in Europe – Germany’s 10-year bond yield fell slightly to 2.41%, while France and the UK saw their yields dip to 3.14% and 4.48%, respectively.
The South African rand weakened slightly, closing February at 18.69/USD, as global risk sentiment fluctuated amid geopolitical uncertainties and shifting central bank policies.
Commodities
The resource sector struggled in February, with the RESI10 index dropping 6.17% as falling metal prices put pressure on mining stocks. Crude oil prices rose, supported by stronger U.S. economic data and heightened geopolitical tensions in the Middle East. Meanwhile, gold prices remained above $2,000 per ounce.
Investment themes and key considerations
Trade disruptions remain a potential risk, particularly with President Trump’s proposed tariffs on China, Canada, and Mexico, which could impact global supply chains and inflationary pressures. Locally, South Africa’s VAT policy uncertainty may influence market sentiment, as investors await clarity on the proposed fiscal measures. In the fixed income space, inflation-linked bonds remain an attractive option, providing stability in an environment of fluctuating interest rate expectations.
Outlook
Key market-moving events in the coming weeks include the SARB’s monetary policy decision, as inflation dynamics evolve. Additionally, the delayed 2025 Budget announcement in March will be closely watched for potential VAT increases and their fiscal implications. On a global scale, trade policy developments will be a critical factor, with investors assessing their potential impact on market volatility and economic growth.
Closing remarks
Despite volatility, markets remain resilient, with opportunities in fixed income and selective equities. As we navigate 2025, staying diversified and proactive in risk management will be key for investors.
