Disclosure: This article is posted to inform readers and not to provide financial advice.
The state of the economy affects you in a tangible way – even more so if you invest. The first half of 2026 has reminded us why we keep coming back to one simple idea: nobody can predict The Markets, but everybody can prepare for them. In this Economic Review, we recap the events that moved The Markets in the first six months of the year, at home and abroad.
A Strong Start, Then A Shock
The year opened on an optimistic note. Global shares reached record highs by mid-January, supported by resilient economic growth, easing inflation and expectations that central banks would continue cutting interest rates. The artificial intelligence (AI) theme, which powered markets through 2024 and 2025, carried into the new year.
That mood changed abruptly at the end of February, when a joint military campaign against Iran was launched by the United States and Israel. Unlike the short-lived conflict of 2025, this one has proved longer and more severe. Disruption around the Strait of Hormuz – the channel through which roughly a fifth of the world’s oil passes – sent the Brent crude oil price sharply higher, at one point rising more than 40% in a single month.
Higher oil prices rekindled inflation fears, and markets repriced accordingly. The S&P 500 – an index of the 500 largest listed companies in the US – ended the first quarter down 4.3%, its weakest quarter since 2022. Locally, the JSE was hit hard in March, with the All Share Capped Index contracting 10.6% in that month alone as resources, technology and luxury-goods shares sold off.
That mood changed abruptly at the end of February, when a joint military campaign against Iran was launched by the United States and Israel. Unlike the short-lived conflict of 2025, this one has proved longer and more severe. Disruption around the Strait of Hormuz – the channel through which roughly a fifth of the world’s oil passes – sent the Brent crude oil price sharply higher, at one point rising more than 40% in a single month.
Higher oil prices rekindled inflation fears, and markets repriced accordingly. The S&P 500 – an index of the 500 largest listed companies in the US – ended the first quarter down 4.3%, its weakest quarter since 2022. Locally, the JSE was hit hard in March, with the All Share Capped Index contracting 10.6% in that month alone as resources, technology and luxury-goods shares sold off.
The Recovery: A Broader, Healthier Market
Then came the second quarter – and with it, a powerful recovery. Global equities rallied strongly through April and May. The MSCI World Index – a benchmark of large companies across developed markets – was up around 10% for the year by the end of May in US dollar terms. Emerging markets did even better, recording their strongest month in over five years in May and gaining roughly 25% year-to-date by month-end.
Two things stood out about this recovery. First, gains were initially concentrated among the providers of AI computing power – chipmakers in particular – while much of the rest of the market lagged. Second, and more encouragingly, market leadership has since broadened. For the first time in years, most major asset classes are outperforming the S&P 500 in 2026: the “Magnificent Seven” technology giants that dominated recent years are, as a group, negative for the year, while US smaller companies have delivered some of their best returns in three decades. Diversified investors – those spread across company sizes, sectors and geographies – have generally had a smoother ride than headline indices suggest.
The first half also produced one of the most talked-about listings in market history: the SpaceX IPO. Beyond the headlines, it served as a useful reminder that even “passive” index investing involves a series of active decisions behind the scenes – which is why understanding what you own always matters.
Two things stood out about this recovery. First, gains were initially concentrated among the providers of AI computing power – chipmakers in particular – while much of the rest of the market lagged. Second, and more encouragingly, market leadership has since broadened. For the first time in years, most major asset classes are outperforming the S&P 500 in 2026: the “Magnificent Seven” technology giants that dominated recent years are, as a group, negative for the year, while US smaller companies have delivered some of their best returns in three decades. Diversified investors – those spread across company sizes, sectors and geographies – have generally had a smoother ride than headline indices suggest.
The first half also produced one of the most talked-about listings in market history: the SpaceX IPO. Beyond the headlines, it served as a useful reminder that even “passive” index investing involves a series of active decisions behind the scenes – which is why understanding what you own always matters.
Inflation And Interest Rates: The Plot Twist
If 2025 was the year of rate cuts, 2026 has delivered a plot twist. The oil shock has pushed inflation higher across major economies – US consumer inflation measured 4.2% in June – though the increase remains well short of the 2021–22 surge. The European Central Bank raised interest rates in June, the US Federal Reserve left rates unchanged while signalling that hikes are back on the table, and markets have moved from pricing in rate cuts to pricing in rate hikes for the remainder of 2026. Global bond yields have continued to climb, with developed-market government borrowing costs near 20-year highs.
In short: the era of cheap money that investors were anticipating at the start of the year has been deferred. “Higher for longer” is once again the operating assumption.
In short: the era of cheap money that investors were anticipating at the start of the year has been deferred. “Higher for longer” is once again the operating assumption.
South Africa: Lagging Shares, A Turning Credit Story
After a stellar 2025, South African equities have lagged in 2026. The March sell-off erased early gains, and the local bourse spent much of the first half clawing its way back – by early July, the FTSE/JSE All Share Index stood near 110,000 points, still up around 17% over 12 months. SA bonds, property and cash have all been modestly positive for the year, with listed property the standout over 12 months.
The South African Reserve Bank raised the repo rate by 25 basis points in May in response to heightened inflation risks. Local inflation printed at 5% in June, driven largely by transport costs, and with the SARB committed to defending its new 3% inflation target, further tightening remains firmly on the table. Fund managers we follow expect inflation to peak later this year before drifting back towards target through 2027 as the oil shock washes out of the numbers.
Yet beneath the surface, something genuinely encouraging is happening. For the first time in more than 16 years, South Africa’s sovereign credit story is moving in the right direction: S&P and Fitch have both upgraded South Africa’s credit rating in the past seven months, and Moody’s has moved its outlook from stable to positive. Add to that our removal from the Financial Action Task Force grey list at the end of 2025, and Eskom reaching a full 365 consecutive days without load shedding in May – the first time since 2018 – and the reform story is quietly gathering pace. A stronger rand, which appreciated meaningfully against the US dollar, euro and pound over the past year, reflects some of that improved sentiment. Economic growth remains modest and uneven, but forecasts point to gradually improving momentum into 2027 and 2028 – and on roughly 10 times forward earnings with an attractive dividend yield, South African shares remain inexpensive by global standards.
The South African Reserve Bank raised the repo rate by 25 basis points in May in response to heightened inflation risks. Local inflation printed at 5% in June, driven largely by transport costs, and with the SARB committed to defending its new 3% inflation target, further tightening remains firmly on the table. Fund managers we follow expect inflation to peak later this year before drifting back towards target through 2027 as the oil shock washes out of the numbers.
Yet beneath the surface, something genuinely encouraging is happening. For the first time in more than 16 years, South Africa’s sovereign credit story is moving in the right direction: S&P and Fitch have both upgraded South Africa’s credit rating in the past seven months, and Moody’s has moved its outlook from stable to positive. Add to that our removal from the Financial Action Task Force grey list at the end of 2025, and Eskom reaching a full 365 consecutive days without load shedding in May – the first time since 2018 – and the reform story is quietly gathering pace. A stronger rand, which appreciated meaningfully against the US dollar, euro and pound over the past year, reflects some of that improved sentiment. Economic growth remains modest and uneven, but forecasts point to gradually improving momentum into 2027 and 2028 – and on roughly 10 times forward earnings with an attractive dividend yield, South African shares remain inexpensive by global standards.
Commodities And The Rand
Precious metals have been the quiet heroes of the past year. Gold traded above US$4,100 an ounce in July – up roughly 24% over 12 months – with silver and platinum posting even larger and solid gains respectively. Brent crude, after nearly doubling in the first quarter, pulled back below US$80 a barrel in early July – helped in part by China curbing its oil imports – before renewed hostilities pushed it higher again, though still well below its April and May peaks. The rand traded at approximately R16.36 to the US dollar – nearly 8% stronger than a year earlier.
Looking Ahead: The Second Half
Several catalysts could unsettle The Markets in the coming months: share valuations remain elevated by historical standards, the US midterm elections loom in November, the possibility of rate hikes has not been ruled out, and the geopolitical headlines seem to change every weekend – is the war ending, or starting up again? It is genuinely hard to know.
That is precisely the point. Investors have now lived through four major market shocks in five years – Covid, the Russia–Ukraine war, 2025’s tariff turmoil and now the Middle East conflict – and in each case, those who stayed invested and stayed diversified came through. As one mid-year analysis we attended put it: experts almost never pick the World Cup winner – and they rarely pick The Markets’ winners either. The first half of 2026 punished concentrated bets and rewarded diversification.
We expect the second half to reward the same discipline:
– Stay diversified. Spreading investments across asset classes, sectors and geographies remains the best defence against uncertainty.
– Don’t chase the ball. Following last year’s winners is not always the winning strategy – this year’s broadening leadership proved it.
– Play the long game. Volatility is the price of admission for long-term returns. The investors who stayed invested through March were rewarded by May.
At TVC, we plan – we don’t predict. If the first half of 2026 has raised questions about your portfolio, your risk exposure, or whether your money is working as hard as it should be, we would love to have that conversation with you.
Speak to your adviser, or book a call at tvc.co.za.
That is precisely the point. Investors have now lived through four major market shocks in five years – Covid, the Russia–Ukraine war, 2025’s tariff turmoil and now the Middle East conflict – and in each case, those who stayed invested and stayed diversified came through. As one mid-year analysis we attended put it: experts almost never pick the World Cup winner – and they rarely pick The Markets’ winners either. The first half of 2026 punished concentrated bets and rewarded diversification.
We expect the second half to reward the same discipline:
– Stay diversified. Spreading investments across asset classes, sectors and geographies remains the best defence against uncertainty.
– Don’t chase the ball. Following last year’s winners is not always the winning strategy – this year’s broadening leadership proved it.
– Play the long game. Volatility is the price of admission for long-term returns. The investors who stayed invested through March were rewarded by May.
At TVC, we plan – we don’t predict. If the first half of 2026 has raised questions about your portfolio, your risk exposure, or whether your money is working as hard as it should be, we would love to have that conversation with you.
Speak to your adviser, or book a call at tvc.co.za.
