Monthly Market Review
January 2025
As we usher in the new year, global markets began 2025 with a blend of optimism and caution, shaped by a dynamic mix of economic shifts, geopolitical risks, and market movements. The start of the year was marked by volatility, with developments such as China’s artificial intelligence advancements and U.S. tariff policies triggering market reactions. Despite the turbulence, most major global markets showed resilience, with developed markets, including Europe, posting solid gains, while emerging markets, including South Africa, experienced a recovery after a challenging end to 2024.
LOCAL MARKETS
Exhibit 1 | Local performance (ZAR) for January 2025
Note: Data illustrated in ZAR. Source: FundFocus. Data as at 31 January 2025. Past performance is not indicative of future performance. For illustrative purposes only and not indicative of any investment.
South Africa
Economy
In January, the South African Reserve Bank (SARB) cut the repo rate by 25 basis points, citing a benign near-term inflation outlook. However, it highlighted uncertainties due to global risks, particularly Trump’s tariff threats. Meanwhile, GDP growth projections were revised higher, now expected to reach 1.8% in 2025 and 2026, and 2.0% in 2027. The rate cut was widely expected; however, two MPC members voted to hold, signalling a cautious stance amid external risks.
Annual inflation edged up to 3.0% from 2.9%, resulting in an average inflation rate of 4.4% for 2024. Over the past five years, inflation has accumulated to 27%, with electricity rising 68%, medical aid increasing 43%, and food costs surging 40%, placing pressure on consumer spending. Meanwhile, rand volatility remained elevated, hovering near R19/USD as global sentiment fluctuated in response to Trump’s policy stance on trade and his threats to cut U.S. funding to South Africa due to the Expropriation Act.
On the energy front, load shedding made a brief return over the weekend, this in the wake of the National Energy Regulator of South Africa’s (NERSA) approval for a 12.7% electricity tariff hike for 2025-26, significantly lower than its initial request of 36.5%. Additional increases have been set at 5.4% for 2026-27 and 6.2% for 2027-28.
Equity Markets
After three months of losses, the JSE rebounded in January, with the FTSE JSE All Share Index rising 2.2% and the Capped SWIX up 2.6%. Precious metals miners led the gains as gold and palladium prices soared, pushing resource stocks nearly 18% higher. Luxury giant Richemont also surged, supported by strong sales growth. Meanwhile, financials, property stocks, and local retailers struggled, with clothing brands facing pressure from weaker sales.
Top Performers for the month
- Harmony Gold Mining Co. Ltd: 43.8%
- Anglogold Ashanti PLC: 35.7%
- Gold Fields Limited: 32.2%
Bottom Performers for the month
- Truworths International Limited: -16.3%
- Mr Price Group Limited: -14.5%
- Foschini Group Limited: -14.5%
Bond Markets
South African bonds had a modest gain in January, with the All-Bond Index (ALBI) rising 0.4%. Investors adjusted their positions in anticipation of possible interest rate cuts, leading to lower yields on key government bonds. However, inflation-linked bonds had mixed results—shorter-term bond yields jumped sharply, while longer-term yields saw only a slight decline.
GLOBAL MARKETS
Exhibit 2 | Global performance (base currency) for January 2025
Note: Data illustrated in base currency. Source: FactSet. Data as at 31 January 2025. Past performance is not indicative of future performance. For illustrative purposes only and not indicative of any investment.
United States
The Federal Reserve (Fed) kept interest rates unchanged in January, stressing that inflation must show sustained improvement before cuts are considered. Fed Chair Jerome Powell highlighted policy uncertainty under Trump’s new administration, making the timeline for rate cuts uncertain. U.S. GDP growth slowed to 2.3% in Q4 from 3.1%, missing expectations, but consumer spending surged by 4.2%, showing resilience in demand.
Equity markets remained under pressure, with the S&P 500 falling 3% on the day of the Fed’s December policy meeting, as higher interest rates weighed on valuations. The S&P500 and Nasdaq closed in the green at 2.7% and 2.4% respectively.
Meanwhile, Nasdaq futures dropped 1.8% overnight following news that Chinese AI startup DeepSeek claimed to have developed a ChatGPT competitor at a fraction of the cost, rattling U.S. technology stocks.
United Kingdom
The FTSE 100 ended 6.2% higher, January has been the best month in more than two years for the FTSE 100. UK government borrowing rose to £17.8 billion in December, exceeding expectations, prompting Chancellor Rachel Reeves to reaffirm her commitment to infrastructure investment, including expansion plans at Heathrow and Gatwick airports. Labour market data was mixed, with wage growth rising 6% in the three months to November 2024, but unemployment increasing to 4.4%, and payroll employment experiencing its sharpest decline since November 2020, signalling labour market weakness heading into 2025.
Europe
European markets experienced mixed performance in January. The STOXX 7.2%, while Germany’s DAX increased with 9.2%. The European Central Bank (ECB) is expected to implement further rate cuts in 2025, with investors closely watching inflation trends.
Asia
Chinese markets struggled in January, with the Hong Kong Stock Exchange increasing 0.8% as weak investor confidence persisted despite President Xi Jinping’s call for market stability. The Evergrande liquidation added to concerns in the property sector, while stimulus measures have yet to deliver meaningful economic recovery, contributing to a 3.0% drop in the CSI 300 Index.
Meanwhile, Japan experienced a significant monetary shift, as the Bank of Japan raised its short-term policy rate to 0.5%, the highest level in 17 years, leading to a -0.1% decline in the Nikkei 225 Index.
Commodities
Crude oil prices rose in January, driven by strong U.S. economic data and risks to Middle East supply. Gold prices declined slightly, but remained above the $2,000 per ounce, reinforcing its role as a safe-haven asset. Meanwhile, Trump’s administration implemented new tariffs, with Canada and Mexico facing 25% duties and China hit with a 10% tariff, sparking concerns over inflationary pressures.
In Conclusion
In January, the SARB cut rates, but market sentiment remained cautious as global trade risks escalated. The U.S. economy showed signs of slowing, though consumer demand remained strong, while Europe and the UK faced inflationary headwinds. China continued to struggle, while Japan’s equity market saw strong gains. Commodities posted mixed results, with oil rising on supply concerns, while gold remained stable. Bond markets remained pressured by uncertainty over rate cuts, with China’s aggressive monetary stimulus highlighting ongoing economic fragility.
As we move further into 2025, the global investment landscape remains a delicate balance of optimism and caution. While the challenges of geopolitical tensions, inflationary pressures, and economic uncertainties persist, there are promising signs of resilience across key markets. In South Africa, the rate cuts and positive economic signals provide a glimmer of hope for local growth, even as global factors continue to influence our outlook.
For investors, the start of the year offers a unique opportunity to reassess strategies and positions considering ongoing market movements. With both risks and opportunities on the horizon, maintaining a diversified portfolio and staying attuned to global shifts will be key to navigating the year ahead.
