Regional performance
Among developed markets, the US sold off with the S&P 500 declining 7.3% but demonstrated relative resilience compared to peers. European markets suffered more severe losses, with the Euro Stoxx 50 falling 10.2% and Germany's DAX dropping 11.8%, reflecting the region's vulnerability as a major energy importer. Japan also underperformed, with the Nikkei 225 plunging 9.3% amid yen weakness and an 11th consecutive week of institutional selling. China, while not immune, notably outperformed global peers with the MSCI China Index declining only 6.4%, benefitting from relative insulation from the oil shock amid large crude oil stockpiles, access to discounted oil from sanctioned suppliers, diversified supply routes and reduced Hormuz dependence, as well as relatively lower oil requirements due to a sustained push towards renewables. South African equities were among the worst performers globally, with the JSE All Share Index declining 12.4% (USD terms: -18.9%) with the rand hitting its weakest level for the year. The month's losses reflected South Africa's vulnerability to surging energy prices (as a net-importer of petroleum products), lower metal prices (as a major exporter) and broader emerging market risk-off sentiment.
Central bank policy shift
Major central banks kept interest rates unchanged at their March meetings but adopted markedly more hawkish tones amid mounting inflation concerns. The US Federal Reserve held rates at 3.75%, but traders now see over a 50% chance of a rate hike this year as inflation concerns mount. The European Central Bank (ECB) kept its deposit rate at 2%, with officials stating a rate hike was "an option" if the price outlook deteriorated further. The Bank of Japan (BOJ) maintained its rate at 0.75% while pledging to raise borrowing costs if its price forecast materializes, while the South African Reserve Bank (SARB) maintained its repo rate at 6.75%, though rand weakness and possible rising imported inflation raised concerns about future tightening.
The bullion fell from all-time highs
Gold prices came under significant pressure (-14.9%) as macrodriven repricing of interest rates, a stronger US dollar, and liquidity conditions overwhelmed traditional safehaven demand. Riskaverse flows favoured the US dollar rather than gold, as higher yields and US energy resilience made dollar assets more attractive. This macro shift coincided with liquiditydriven selling and forced deleveraging, with investors using gold as a source of cash to meet margin calls amid broader market volatility. Notably, we also saw central bank selling (as opposed to heavy buying previously) with countries like Türkiye moving to defend their currencies. Finally, the selloff was amplified by profittaking and position unwinding after gold’s exceptional 2025 to early2026 rally, turning what would normally be supportive geopolitics into a headwind for the bullion.
Uncertain times ahead
Markets remain focused on US-Iran ceasefire negotiations and their implications for energy prices and global inflation. The path forward depends heavily on whether diplomatic efforts can stabilise oil prices and whether central banks can navigate the delicate balance between controlling inflation and supporting economic growth in an exceptionally uncertain geopolitical landscape.
Outlook
Local
- This world continues to face revolving headwinds over the 2020s, from the Covid-19 pandemic lockdowns in the early years; to the renewed Russia-Ukraine conflict in 2022; the tariffs shock in 2025; and renewed Middle East tensions this year. These persistent challenges highlight political and economic fracturing that will test global and country-level resilience. We are likely to continue experiencing confidence and inflationary shocks, which could weigh on financial conditions and investment decisions.
- While we remain optimistic about South Africa’s outlook, we are worried about the impact of the ongoing war on inflation. Higher energy costs and a weakening rand are the more immediate risks but the passthrough to other costs will compound the longer the war lasts. The latest market-wide forecasts have been pushed higher; our own forecast has inflation peaking above 4% but remaining within the SARB’s tolerance band. This is consistent with the SARB’s view as well as broader consensus.
- Should the second-round effects of this oil price spike be pronounced and force a pivot in inflation expectations (away from the 3% target), this would generate a high risk of monetary policy tightening. Conversely, a short-lived supply shock that has a concentrated impact would allow the Monetary Policy Committee (MPC) to look through the inflation uptick and the cutting cycle could resume. For now, the MPC has kept rates unchanged at 6.75%.
- Unfortunately, a delay in the interest rate cutting cycle, alongside softer terms of trade benefits and any potential slowing in portfolio inflows, will produce less supportive financial conditions for household spending and investment. Furthermore, supply disruptions could weigh intensely on industries across the globe, weakening production and trade prospects. Therefore, while we think reforms will still uphold longer-term growth, we are concerned about the strength of the cyclical recovery.
- In a nutshell, we will continue to monitor how this war progresses and the unfolding impact on the economy. In the meantime, government should remain prudent in sustaining the momentum of structural reforms while doing what is possible to protect vulnerable households and industry. Ultimately, it is this reform agenda that will improve the operating environment and boost long-term growth potential. This will enhance the country’s resilience to external shocks and allow some investors to look through the volatility
Global
- March was dominated by the impact of Operation Epic Fury, a joint military operation that started on the 28 February with the US and Israel bombarding Iran. Iran retaliated by attacking US military bases in surrounding Gulf states and effectively closing the important Strait of Hormuz.
- Economic data out of the US was mixed in March. Employment data disappointed with the unemployment rate rising to 4.4%. Bloomberg consensus for US 2026 growth was pulled back to 2.3% from 2.5% the previous month.
- Europe’s growth expectations also fell from 1.2% to 1.1% as higher oil and gas prices are expected to negatively impact inflation and growth, creating a stagflationary environment. Japan and China expectations were unchanged at 0.8% and 4.6%, respectively.
- US January CPI came in in line with expectations of 2.4% and core inflation at 2.5%. This is still some way off the 2% target of the Fed. Shelter inflation and core services should continue to trend lower, causing overall inflation to move down towards target, but risks remain that inflation proves “stickier” than expected (depending on where tariffs eventually settle). For now, it’s all about oil and how much longer it will remain above $100 per barrel.
- The Fed kept rates unchanged at 3.5% to 3.75% at its March meeting, as expected. Eleven members voted for this outcome, against one member who preferred a 25bps cut. The Federal Open Market Committee statement acknowledged increased uncertainty due to the war in the Middle East, noting that “the implications of developments in the Middle East for the US economy are uncertain”. During the press conference, Powell vowed to stay at the Fed to see out a Department of Justice probe, despite pressure from the Trump administration.
- Gold and precious metals sold off aggressively in March, reversing the strong trend upwards over the last year, with gold down 16% and platinum down 22% at the time of writing. Reasons for the gold weakness included stopping out of positions from institutional as well as retail clients, some central banks selling, and a stronger US dollar as rate cuts were priced out of the market.
- Oil prices rose by over 50% as the war intensified and the Strait of Hormuz remained closed for most of the month. Roughly 20-25% of all oil passes through the Strait and many countries have now cut production as storage facilities are full and vessels cannot pass through the Strait.
- Given all the above uncertainties, we are closely aligned to our strategic asset allocation benchmarks.
