The Inside Track – May Insights

29 May 2025

Welcome to the Tenth Edition of The Inside Track!
Markets. Money. The forces shaping them. No noise – just clear insights to help you stay ahead and make smarter financial moves.

March and April were volatile, but markets kept moving. Global indices dropped sharply, yet most have already rebounded. The S&P 500 is back near its all-time high. Volatility made headlines, but beneath the surface, real momentum is building.

And not just in the U.S. International equities, long overlooked and underperforming relative to their earnings, are starting to stir. This time, it is not only about valuations. It is about structural shifts in policy, currency, and market behaviour.

That is where the real story begins.

For the first time in years, global equities are showing real momentum. This is not just about price – it is about fundamental change unfolding across major economies:

• Germany has announced one of its largest fiscal stimulus packages since reunification
• Japan and South Korea are introducing governance reforms to unlock more value for shareholders
• China is supporting domestic industries and tech in response to rising tariffs
• A weakening U.S. dollar is improving the relative appeal of global earnings
• Europe is leaning into revitalisation, with more investment-friendly policy starting to take shape

As a result, non-U.S. markets have outperformed the S&P 500 year to date. That does not mean the U.S. has lost its edge. It remains one of the most resilient and innovative economies in the world. But the performance gap is narrowing, and global opportunities are becoming harder to ignore.

A number of undervalued investment indexes, with strong earnings but limited attention in recent years, are now rebalancing the market narrative. This is challenging the herd mentality that has long favoured U.S. concentration. One only needs to look at our own local index – the JSE All Share.

Despite an economy struggling to grow beyond 1.5 percent, a sub-investment grade credit rating (BB minus), and persistent structural headwinds, the JSE has delivered between 11 and 13 percent year to date, and over 22 percent over the last 12 months.

It is a reminder that performance and perception do not always align. Markets and economies may be connected, but the relationship is far from linear. This is exactly why the age-old adage of diversification remains king.

So perhaps things are not as doom and gloom as the media would have us believe. Much of this momentum is being driven by necessity. As global trade dynamics shift, countries are focusing inward, prioritising domestic resilience, structural reform, and strategic independence.

This shift is not just driven by sentiment. It is structural. But whether we act on it often depends less on the data, and more on how we process uncertainty.

Market indicators

Returns % (to 23 May 2025)

Global Market News

• The US trade court has blocked most of Trump’s global tariff agenda, declaring the bulk of it illegal. The ruling has strengthened the dollar and may now head to the Supreme Court, with  implications for global trade.

• Moody’s Downgrades U.S. Credit Rating
  Moody’s cut the U.S. to AAa1, citing long-term fiscal risks. While Trump’s latest spending bill sparked concern, this marks the third downgrade in 14 years –  following similar moves under Obama (2011) and Biden (2023)

• UK Inflation Jumps Again
  CPI rose from 2.6% to 3.5% in April, driven by housing and food prices. The Bank of England remains cautious on further rate moves.
• Emerging Markets Attract $10.6bn
  Equity funds in emerging markets have pulled in over $10 billion this year as investors shift away from overvalued developed markets.
• Gold has extended its decline for a fourth straight day, down over 3% this week, as a potentially stronger dollar continues to pressure prices.

• Europe Launches €200bn AI Push
  The EU’s InvestAI initiative includes four gigafactories and long-term backing from over 60 companies committing €150bn to the sector.

• India Set to Power Global Growth
  The Reserve Bank of India sees falling inflation and stable conditions that could support a rate cut — positioning India as a key growth engine.

• UK Retail Sales Beat Forecasts
  Sales rose 1.2% in April, helped by better weather and a rebound in consumer confidence.

• ECB Rate Cut Likely in June
  Markets are pricing in a 90% chance that the European Central Bank will begin easing rates –  possibly dropping below 2%.
• Fed Holds Rates Steady
  No change from the U.S. Federal Reserve –  rates remain at 4.25% to 4.5%, where they’ve been since December.

South Africa

• SARB Poised for Rate Cut
  The South African Reserve Bank is expected to reduce the repo rate by 25 basis points to 7.25% on May 29, as inflation remains below the 3% – 6% target range.
• GDP Growth Forecast Downgraded
  Economists have lowered South Africa’s 2025 GDP growth projection to 1.2%, citing potential impacts from proposed U.S. tariffs and global trade tensions.
• The VAT increase may have been curbed, but there are still no real austerity measures in place to address the underlying fiscal pressure.
• Tourism Sector Shows Growth
  Tourism contributed 3.3% to South Africa’s GDP in May 2025, with 1.8 million people employed in the sector, reflecting a positive trajectory in post-pandemic recovery.
• Dual Citizenship Restored
  Big shift for expats: South Africans who took up a second nationality without permission no longer lose their citizenship. The Constitutional Court overturned the old law on 6 May 2025, and Home Affairs has confirmed that affected individuals are now recognised as citizens again. An online portal will go live in June to help verify status.
• Reframing South Africa’s Debt
  For every rand of tax you pay from your hard-earned income, 22 cents goes straight to servicing government debt. In other words, more than a fifth of your tax is covering the cost of past borrowing.

As for the Trump-Ramaphosa exchange? Think The High Chaparral – only no one has a map, the horses are missing, and both cowboys are arguing over who fired the first shot.

Food for Thought

Modern Life: Terms & Conditions Apply
We want better service, faster replies, deeper meaning –  and fewer emails. Pick two

Small Observations, Big Truths
The slowest queue is always the one you choose. Not because it is –  but because watching others move faster makes time feel slower.

Quiet Ironies
We ask kids what they want to be when they grow up, while adults struggle to answer the same question.

Life at 100km/h
We’ve got real-time news, instant messaging, same-day delivery – and no idea what we had for lunch.

Reset Button
Most of what used to be urgent a year ago doesn’t matter now. That’s not a failure –  it’s perspective arriving late.

Quote for the Month

The best way to predict the future is to create it 

Peter Drucker

Chart of the Month

Chart A

In 2018, tariffs from the first Trump administration triggered a trade war that unsettled markets and dominated headlines.

Fears of a global slowdown led the S&P 500 to fall 4.4% for the year, including a 19.4% drop from September to December. Yet in 2019, the market rebounded strongly, gaining 31.1% as trade deals were announced and consumer spending held steady.

Will today’s volatility give way to recovery in 2026? It’s uncertain –  but with U.S. midterms ahead, the Trump administration may shift its focus back to trade and domestic issues that support market confidence.

Chart B

The chart below tells a fantastic story

The dark blue line reflects monthly price swings –  sharp declines, sudden rallies, and constant noise. This time it’s different. Let’s get out. Draw the money. Take the hit. That’s the short-term view. But behind it, the light blue gradient shows something else entirely –  the long-term view.

A single $10,000 investment in the S&P 500 at the start of 2015 tripled to $34,000 by the end of 2024. That return didn’t come from reacting to each wobble. It came from staying invested through all of them.

Perspective for the Long Run

Is it the brand or the investment?

It’s common parlance among investors: “Allan Gray made me money,” or “I’m with Citadel, Sygnia, Coronation, Discovery, Liberty, PSG, etc.” But that’s not really where the money is made.

The brand is just the access point. The return comes from what you’re actually invested in: equities (shares in companies), bonds (interest-bearing loans), property (real estate), cash (low-risk reserves), commodities (like gold or oil), or digital currencies (like Bitcoin). What matters is how that mix is structured and managed over time.

Each fund is managed by one or two highly skilled individuals, working within a mandate, under commercial pressure to retain assets and remain competitive. That environment often discourages bold or contrarian positioning, especially if it risks underperforming peers in the short term. It’s one of the reasons so few funds consistently outperform their benchmarks, even though they charge fees to try and do exactly that.

Some fund managers do take bold, contrarian views and have more flexibility –  often because they face less shareholder pressure. A few consistently beat their benchmarks and justify their fees. But they’re the exception. Most work within tight mandates and under pressure to stay competitive. That’s why planning matters. Strategy should come before product selection. What you’re in, how it’s built and what is costs often matters more than the name on the label.

Effective portfolios aren’t built on names. They’re built on smart strategy and the discipline to stay invested in what works, not just what’s familiar.

I hope this month’s mailer gave you something valuable to think about. Looking forward to catching up again at the end of July. Until then, and as always, I’m just a click away if you’d like insight, guidance or assistance.

Take care, stay mindful, and enjoy the moments that matter.