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. We closed our half-year review by noting that the geopolitical headlines seem to change every weekend. The third quarter proved the point: a ceasefire collapsed, oil prices surged, central banks started raising interest rates again – and yet global shares still ended the quarter higher. In this Economic Review, we recap the events that moved The Markets from July to September, at home and abroad.
The Ceasefire That Didn’t Hold
We ended June on a hopeful note. The June ceasefire between the United States and Iran was holding, oil prices had fallen back and share markets were in a buoyant mood. That optimism did not last. In early July the ceasefire collapsed, renewed US strikes and attacks on shipping again restricted traffic through the Strait of Hormuz, and the oil price took off once more.
Brent crude oil – the international benchmark – climbed from around US$73 a barrel at the start of the quarter to about US$103.50 at the end of September, a rise of roughly 40%. More than 14% of that came in September alone. By quarter-end, talks through Qatari mediators had made little progress, with reports suggesting both sides increasingly expect renewed military conflict.
As one fund manager we follow put it in their quarterly letter, the third quarter was a humbling reminder that nobody has a crystal ball when it comes to The Markets.
Brent crude oil – the international benchmark – climbed from around US$73 a barrel at the start of the quarter to about US$103.50 at the end of September, a rise of roughly 40%. More than 14% of that came in September alone. By quarter-end, talks through Qatari mediators had made little progress, with reports suggesting both sides increasingly expect renewed military conflict.
As one fund manager we follow put it in their quarterly letter, the third quarter was a humbling reminder that nobody has a crystal ball when it comes to The Markets.
Inflation And Interest Rates: The Hiking Cycle Returns
Higher energy prices put inflation back at the top of every central banker’s worry list. On 16 September, the US Federal Reserve raised interest rates by 0.25 percentage points to a range of 3.75%–4.00% – its first increase since July 2023 – and signaled that at least one more hike is likely before year-end. Several other major central banks moved in the same direction, and the South African Reserve Bank followed a week later (more on that below).
There is a twist worth being honest about: measured inflation in the US was not actually accelerating. US consumer inflation held at 3.4% in August, and core inflation – which strips out volatile food and energy prices – fell to 2.4%, its lowest level since early 2021.
Central banks are reacting less to where inflation is today than to the risk that expensive oil filters through into everything else. In other words, they are acting on what might happen, not on what the numbers already show.
Bond markets felt the strain. The yield on the US 10-year government bond rose to about 5.3% at the end of September , its highest level since 2002, and long-dated US government bonds lost around 5% in September alone. When yields rise, the prices of existing bonds fall – which is why global bonds were among the weakest asset classes this quarter. Some fund managers we follow see a longer-term silver lining: New Road Capital compares today’s high US yields with South African government bonds a few years ago, when yields were very high, few investors wanted them, and those who were patient were later rewarded.
There is a twist worth being honest about: measured inflation in the US was not actually accelerating. US consumer inflation held at 3.4% in August, and core inflation – which strips out volatile food and energy prices – fell to 2.4%, its lowest level since early 2021.
Central banks are reacting less to where inflation is today than to the risk that expensive oil filters through into everything else. In other words, they are acting on what might happen, not on what the numbers already show.
Bond markets felt the strain. The yield on the US 10-year government bond rose to about 5.3% at the end of September , its highest level since 2002, and long-dated US government bonds lost around 5% in September alone. When yields rise, the prices of existing bonds fall – which is why global bonds were among the weakest asset classes this quarter. Some fund managers we follow see a longer-term silver lining: New Road Capital compares today’s high US yields with South African government bonds a few years ago, when yields were very high, few investors wanted them, and those who were patient were later rewarded.
Global Shares: Strong Headlines, Narrow Foundations
Despite all of this, global shares ended the quarter in positive territory. The MSCI All Country World Index – a broad benchmark of shares across developed and emerging markets – returned 1.7% in US dollars, while the S&P 500 – an index of the 500 largest listed companies in the US – returned 2.3%. The path was bumpy . The quarter opened with a sharp sell-off in chipmakers in early July, after a lofty rally in memory-chip shares. The recovery then took the S&P 500 to a record high in early August and the technology-heavy Nasdaq 100 to a record in September.
Look beneath the headline, though, and the picture changes. In our half-year review we celebrated how market leadership had broadened. In the third quarter, it narrowed again. Large technology and artificial intelligence (AI) companies did the heavy lifting, while US smaller companies, Japanese shares and Chinese shares all ended the quarter lower. In September, roughly three-quarters of the shares in the S&P 500 fell, even though the index itself barely moved.
That is exactly why we do not judge a portfolio against a single headline index. A narrow market can make diversification feel frustrating in the short term – but concentrated leadership is also where concentrated risk builds up. For the year to date, global shares remain the strongest performing asset class for South African investors, up 12.4% in rand terms to the end of September.
Look beneath the headline, though, and the picture changes. In our half-year review we celebrated how market leadership had broadened. In the third quarter, it narrowed again. Large technology and artificial intelligence (AI) companies did the heavy lifting, while US smaller companies, Japanese shares and Chinese shares all ended the quarter lower. In September, roughly three-quarters of the shares in the S&P 500 fell, even though the index itself barely moved.
That is exactly why we do not judge a portfolio against a single headline index. A narrow market can make diversification feel frustrating in the short term – but concentrated leadership is also where concentrated risk builds up. For the year to date, global shares remain the strongest performing asset class for South African investors, up 12.4% in rand terms to the end of September.
South Africa: A Quarter Of Two Halves
For South African shares, the third quarter was a round trip. August brought a strong rally in gold and platinum miners as precious metal prices climbed. September took most of it back: the FTSE/JSE All Share Index fell 5.8% in the month, with resource shares down more than 9% and banks also under pressure. Over the full quarter, the All Share Index ended almost exactly where it started, at –0.3%. Beneath that flat number, resource shares gained around 17%, while financial shares fell nearly 4% and industrial shares more than 10%.
For the year to date, local shares are the only major South African asset class in negative territory, at –3.2%, behind cash (5.1%), bonds (3.5%) and listed property (3.1%). Notably, cash has outpaced inflation (4.3%) so far this year. Local bonds slipped 0.7% over the quarter but are still up 12.8% over 12 months, and South African shares remain inexpensive by global standards, trading on less than 10 times forward earnings.
The economy is struggling to find momentum. Gross domestic product (GDP) contracted by 0.2% in the second quarter, after growth of 0.4% in the first, with manufacturing, mining and trade the biggest drags. Compared with a year earlier, the economy was still 0.9% larger. The South African Reserve Bank (SARB) trimmed its 2026 growth forecast to 1.2% from 1.4%, although it still expects a rebound in the second half of the year.
Inflation has been a moving target. Headline inflation eased from a two-year high of 5.0% in June to 4.3% in July – helped by lower fuel prices and food inflation of just 0.9%, its lowest level in 16 years – before edging up to 4.4% in August. The SARB surprised most economists by keeping the repo rate unchanged at 7% in July. But as the oil shock intensified, it raised the repo rate by 25 basis points (0.25 percentage points) to 7.25% on 23 September, taking the prime lending rate to 10.75%. SARB Governor Lesetja Kganyago warned that inflation could rise above 5% in the final months of 2026 and into early 2027 as fuel costs feed through, and reaffirmed the Bank’s commitment to bringing inflation back to its 3% target. For households with home loans and vehicle finance, that means higher monthly repayments.
There are bright spots. South Africa’s trade surplus widened to R20.5 billion in August, its largest since March. New SARB research suggests the 3% inflation target is gaining credibility with households and businesses, which makes inflation easier to manage over time. And the Governor has said there is growing confidence that South Africa’s debt burden has peaked.
For the year to date, local shares are the only major South African asset class in negative territory, at –3.2%, behind cash (5.1%), bonds (3.5%) and listed property (3.1%). Notably, cash has outpaced inflation (4.3%) so far this year. Local bonds slipped 0.7% over the quarter but are still up 12.8% over 12 months, and South African shares remain inexpensive by global standards, trading on less than 10 times forward earnings.
The economy is struggling to find momentum. Gross domestic product (GDP) contracted by 0.2% in the second quarter, after growth of 0.4% in the first, with manufacturing, mining and trade the biggest drags. Compared with a year earlier, the economy was still 0.9% larger. The South African Reserve Bank (SARB) trimmed its 2026 growth forecast to 1.2% from 1.4%, although it still expects a rebound in the second half of the year.
Inflation has been a moving target. Headline inflation eased from a two-year high of 5.0% in June to 4.3% in July – helped by lower fuel prices and food inflation of just 0.9%, its lowest level in 16 years – before edging up to 4.4% in August. The SARB surprised most economists by keeping the repo rate unchanged at 7% in July. But as the oil shock intensified, it raised the repo rate by 25 basis points (0.25 percentage points) to 7.25% on 23 September, taking the prime lending rate to 10.75%. SARB Governor Lesetja Kganyago warned that inflation could rise above 5% in the final months of 2026 and into early 2027 as fuel costs feed through, and reaffirmed the Bank’s commitment to bringing inflation back to its 3% target. For households with home loans and vehicle finance, that means higher monthly repayments.
There are bright spots. South Africa’s trade surplus widened to R20.5 billion in August, its largest since March. New SARB research suggests the 3% inflation target is gaining credibility with households and businesses, which makes inflation easier to manage over time. And the Governor has said there is growing confidence that South Africa’s debt burden has peaked.
Commodities And The Rand
Oil dominated the commodity headlines, but it was not the only story. Gold and platinum rallied strongly in August before giving back much of those gains in September – which explains most of the JSE’s round trip. Copper reached record highs during the quarter on tight supply and strong demand from electrification and data centres, a reminder of how the AI build-out is reshaping demand for physical resources.
The rand ended the quarter broadly where it started, at around R16.42 to the US dollar. It weakened by about 1.6% in September , as the US dollar strengthened after the Fed’s rate hike and higher oil prices weighed on oil-importing emerging markets like ours. Over 12 months, the rand is still about 5% stronger against the US dollar.
The rand ended the quarter broadly where it started, at around R16.42 to the US dollar. It weakened by about 1.6% in September , as the US dollar strengthened after the Fed’s rate hike and higher oil prices weighed on oil-importing emerging markets like ours. Over 12 months, the rand is still about 5% stronger against the US dollar.
Looking Ahead: The Final Quarter
The last quarter of 2026 is crowded with potential catalysts: the US–Iran conflict and its effect on oil, a Federal Reserve that has signaled more hikes (its next meeting is on 27–28 October), the US midterm elections in early November , South Africa’s local government elections in November, and the SARB’s final rate decision of the year, also in November.
Valuations in the US remain elevated – developed-market shares trade on roughly twice the forward earnings multiple of emerging markets – while South African shares remain cheap but need stronger economic growth to re-rate. None of this can be predicted with confidence, and early October has already shown why trying is so hard: within a week of a gloomy September close, the S&P 500 and Nasdaq were back at record highs. At a Morningstar market call we attended in October, Morningstar’s Mind the Gap research made a point worth repeating: when investors try to time The Markets – buying after rallies and selling after falls – they tend to earn less than the very funds they invest in. Volatility doesn’t only affect returns; it affects behaviour.
We expect the final quarter to reward the same discipline as the first three:
– Stay diversified. Spreading investments across asset classes, sectors and geographies remains the best defence against uncertainty – this quarter, the best and worst performers were only weeks apart.
– Look beneath the headline. A rising index can hide a narrow market. Understanding what you own, and why, matters more than any single number.
– Play the long game. Over the past five years, local shares have returned 15.3% a year, and over ten years global shares have returned 15.0% a year – through every shock along the way. Time in The Markets matters more than timing The Markets.
At TVC, we plan – we don’t predict. If the third quarter has raised questions about your portfolio, your interest-rate 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.
Past performance is not necessarily a guide to future returns. The value of investments may go down as well as up. TVC Wealth & Health Managers (Pty) Ltd is an Authorised
Financial Services Provider. FSP No: 10923.
Valuations in the US remain elevated – developed-market shares trade on roughly twice the forward earnings multiple of emerging markets – while South African shares remain cheap but need stronger economic growth to re-rate. None of this can be predicted with confidence, and early October has already shown why trying is so hard: within a week of a gloomy September close, the S&P 500 and Nasdaq were back at record highs. At a Morningstar market call we attended in October, Morningstar’s Mind the Gap research made a point worth repeating: when investors try to time The Markets – buying after rallies and selling after falls – they tend to earn less than the very funds they invest in. Volatility doesn’t only affect returns; it affects behaviour.
We expect the final quarter to reward the same discipline as the first three:
– Stay diversified. Spreading investments across asset classes, sectors and geographies remains the best defence against uncertainty – this quarter, the best and worst performers were only weeks apart.
– Look beneath the headline. A rising index can hide a narrow market. Understanding what you own, and why, matters more than any single number.
– Play the long game. Over the past five years, local shares have returned 15.3% a year, and over ten years global shares have returned 15.0% a year – through every shock along the way. Time in The Markets matters more than timing The Markets.
At TVC, we plan – we don’t predict. If the third quarter has raised questions about your portfolio, your interest-rate 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.
Past performance is not necessarily a guide to future returns. The value of investments may go down as well as up. TVC Wealth & Health Managers (Pty) Ltd is an Authorised
Financial Services Provider. FSP No: 10923.
