As part of our ongoing commitment to keeping you informed, we would like to share a detailed update from our first 2026 asset allocation meeting, held this week. This note provides an overview of the global and domestic environment, our current views, and how we have positioned our portfolios in response.
The first fifteen days of 2026 have brought an extraordinary sequence of unforeseen geopolitical and policy events. These “unknown unknowns” underscore the elevated level of uncertainty in global markets. Among the most significant developments:
Individually, each of these events had the potential to move global markets meaningfully. Collectively, their rapid succession highlights how much uncertainty investors face. Interestingly, despite the magnitude of these developments, markets have been largely unmoved - something we view with caution.
Our broad survey of research from global and local providers shows that the market is markedly bullish on the outlook for 2026. Historically, this type of consensus optimism has often coincided with elevated risk, and for that reason, we approach it with measured scepticism.
We expect global GDP growth of approximately 3% in both 2026 and 2027. Valuations, especially in U.S. equities and the broader MSCI World Index, remain elevated:
Despite this, earnings momentum is strong, with:
Thus, while valuations are full, they are currently supported by earnings fundamentals, while we remain constructive on the earnings fundamentals of the stocks involved in the AI thematic, we believe that there is a broader based earnings growth potential in the US this year.
Consensus forecasts for South Africa point to GDP growth of 1.8% in 2026, rising slightly in 2027. Our in house view is more constructive:
We expect 2% GDP growth in both 2026 and 2027.
Our rationale:
Inflation is anchored following the SARB inflation targeting regime of 3% announced late in 2025, operation Vulendela is positively impacting the economy South Africa’s removal from the grey list is constructive, which have together resulted in rating agency upgrades.
Whilst this is cyclically positive – South Africa will need large private sector investment to sustain this growth momentum.
The past year saw a significant rally in South African bonds:
At current levels, we see limited room for further capital appreciation. Instead, returns are likely to mirror the running yield of around 8.3–8.4%.
With the new 3% inflation targeting regime, real yields remain compelling:
2025 was an extraordinary year for South African equities—up 42% in ZAR, the best Rand return in 20 years, and 62% in USD.
Replicating this performance will be challenging even if precious metal prices continue their strong run. However, we remain positive on domestic SA equities for two key reasons:
We expect mid teens earnings growth from domestic equities in 2026, with the resource stocks pushing the FTSE JSE All Share earnings growth north of 30%.
We are constructive on emerging markets and expect moderate USD weakness. Our base case:
Interest Rates: Expected Cuts Both Abroad and at Home
Going into 2026, our stance is constructive, balanced with necessary caution. Key portfolio actions:
On the protection side, we have purchased out the money puts on the South African equity market. Relative to our historical use of protection strategies, the current level of protection is the highest we have ever had.
This reflects our recognition of the heightened uncertainty and the series of “unknown unknowns” already evident in the early days of 2026.
While markets may appear calm, the backdrop is far from ordinary. We remain focused, vigilant, and disciplined, balancing opportunity with prudent risk management. Our portfolios are positioned to participate in growth while being protected against the unexpected.
Thank you for your continued trust and partnership.
The Laurium Capital Team
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