Global Markets
Global markets faced a challenging and volatile opening to 2026, as the constructive momentum that defined the final months of 2025 was abruptly checked by severe geopolitical shocks and a significant repricing of interest rate expectations. While the previous year ended with investors embracing the narrative of a soft landing and anticipating a cycle of monetary easing, the first quarter forced a pivot toward a more defensive and cautious stance. The defining event of the period was the sharp escalation of conflict in the Middle East during March, which disrupted critical energy supply routes and triggered a rapid surge in energy prices. This disruption drove a broad-based risk-off sentiment that permeated nearly every major asset class, reversing a significant portion of the gains accumulated during the initial weeks of the year.
The impact on global equity markets was profound and indiscriminate, as the MSCI World Index fell by 6.4% in March alone, bringing its three-month return for the quarter to  -3.6%. Investors, previously focused on corporate earnings growth and the potential for rate cuts, were forced to grapple with the reality of higher input costs and the possibility that central banks might have to keep policy restrictive for longer than initially forecasted. Growth-oriented sectors, particularly technology, faced heavy selling pressure as valuation concerns resurfaced in the face of rising bond yields. The MSCI World Growth Index declined by 6.7% over the month, reflecting a broader rotation away from high-duration assets as the higher-for-longer narrative gained renewed traction.
In the United States, economic momentum remained firm at the start of the year, but the S&P 500 Index declined by 5.0% in March to end the quarter down 4.3%. The tech-heavy NASDAQ Composite fell 4.7% in March, declining 7.0% for the quarter, while the Dow Jones Industrial Average retreated 5.3% in March, finishing the period down 3.3%. While economic data earlier in the quarter had pointed to a resilient labor market, forward-looking indicators began to soften as the implications of the energy shock became clearer. Real GDP growth, which had expanded at an annualised 4.3% in the preceding quarter, faced headwinds from cooling business investment and a decline in consumer confidence as energy costs spiked. The Federal Reserve, meeting in March, opted to hold the federal funds target range steady, emphasising a data-dependent path. Fed officials acknowledged the difficult trade-off now facing the committee: the inflationary threat posed by surging oil prices versus the growing downside risks to economic growth.
European markets were even more severely affected by the geopolitical turmoil, given the region’s high sensitivity to global trade and its reliance on imported energy. The German DAX plunged 10.3% in March to finish the quarter down 7.4%. The Euronext Paris CAC 40 followed suit with an 8.8% decline in March, ending the quarter down 4.0%. Manufacturing sectors were hit particularly hard as rising input costs and weakening demand from key export markets led to downward revisions in corporate earnings guidance. In the United Kingdom, the FTSE 100 declined 6.2% in March but managed a positive quarterly return of 3.4%. The index’s heavy weighting in energy and resources provided a natural hedge against the spike in commodity prices, yet this was not enough to offset the wave of global de-risking in the final month. Global property markets also felt the strain of rising yields, ending the month of March with a 0.0% return as the tailwinds from 2025 vanished.
Emerging markets experienced their worst monthly performance in recent years, with the MSCI Emerging Markets Index falling 13.1% during March, erasing earlier gains to end the quarter down 0.2%. The asset class faced a perfect storm of a materially stronger US dollar and the direct economic hit of higher energy costs. Within this space, China’s markets showed relative resilience despite the global volatility. The SSE Composite (China) declined 6.5% in March, a smaller retreat than the broader index, ending the quarter down 1.9%. Economic data from the region pointed to a robust rebound in industrial output and foreign trade, while bank lending surged as credit demand increased. Continued growth in high-tech manufacturing and infrastructure investment bolstered Chinese equities, although softer domestic consumption and persistent weakness in the private property sector remained notable headwinds. While the broader Asian region suffered from foreign capital outflows, the structural transition in China toward new growth drivers provided a partial buffer against the broader sell-off.
Local Markets
South African financial markets mirrored the global volatility, experiencing a sharp consolidation in March following a strong start to the year. Local assets faced pressure as global risk sentiment softened as investors reassessed the outlook for interest rates and economic growth. The South African equity market’s recent streak as a top-performing global bourse ended abruptly, with the FTSE/JSE All Share Index declining by 10.5% in March. Performance across sectors was starkly divided. While the Resources sector proved defensive early on, the FTSE/JSE Resources 10 Index fell 16.5% in March but maintained a positive quarterly return of 7.2%. Industrials and Financials were hit hard, with the FTSE/JSE Financial 15 Index declining 9.8% in March to end the quarter down 0.3%. Listed property was particularly weak, falling 11.4% in March to end the quarter down 4.9% as interest rate outlooks changed due to the conflict. Overall, the significant losses in March were enough to drag the All-Share Index into negative territory for the year-to-date, ending the quarter at -0.6%.
Local bond markets, which had delivered outstanding returns in 2025, faced one of their most volatile periods in decades. The FTSE/JSE All Bond Index (ALBI) returned -6.8% in March, ending the quarter down 3.4%. This volatility was driven by rising energy prices and heightened inflation concerns, which pushed bond yields higher across the board. In particular, longer-term bonds saw their values drop more significantly than shorter-term ones as investors demanded a higher premium for long-term risk. Foreign investors became aggressive net sellers, offloading R72.3 billion worth of SA bonds during March as they sought the safety of the US dollar. Inflation-linked bonds also faced pressure, returning -1.1% for the quarter, as investors priced in higher near-term inflation and a reduced probability of rate cuts.
On the macroeconomic front, South Africa entered the year from a position of relative strength, supported by a constructive fiscal framework and moderating inflation. Data confirmed that headline inflation reached 3% in February, comfortably within the South African Reserve Bank’s (SARB) target range. Core inflation remained benign at 3.1%, but this period was interrupted by the energy shock; forecast data for March suggested inflation could spike back toward 4.1% due to fuel price pressures. Against this backdrop, the SARB maintained a cautious policy stance at its March meeting, keeping the repo rate unchanged at 7.0%. While the central bank had previously signalled that the next move might be a cut, it emphasized that policy would remain restrictive until the risks from global instability and food and fuel prices were more clearly contained.
The rand was caught in the global crossfire, experiencing significant volatility as the flight to quality dominated currency markets. The currency depreciated 7.0% against the US Dollar in March, ending the quarter down 2.9% at approximately R16.9/USD. Against other major peers in March, the Rand fell 4.2% against the Euro and 5.0% against the British Pound. Despite this retreat from the R16.6/USD levels seen at the end of 2025, the rand remains notably stronger than the R18.3/USD levels seen a year prior. The recovery in South Africa’s terms of trade and improved domestic fundamentals, including better-than-expected tax collection from the mining sector, provided a vital cushion. This strength helped contain imported inflation, particularly fuel prices, supporting national sentiment despite the turbulent global backdrop.
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