Financial services firm PPS Investments, in its ‘Investment Perspectives’ report for the third quarter, says it expects the environment to remain noisy, but benign, over the coming quarters and for markets to continue oscillating as new data and policy surprises come to the fore.

Further, the company foresees potential for the US rally to continue, supported by AI-led growth, and for broader gains outside the US in markets, such as South Africa, where valuation support exists.

Additionally, the consensus view is that the dollar will continue to weaken over the coming years as investors continue diversifying into other safe havens and, if so, this is likely to affect the rand, PPS Investments says.

THIRD-QUARTER PERFORMANCE
Global markets extended their gains in the third quarter of the year on the back of resilient economic growth, easing trade tensions and early signs of renewed easing by the US Federal Reserve.

Similarly, global equities delivered a solid gain in the quarter, but dollar weakness or rand strength dampened performance somewhat in rand terms.

However, investor optimism was underpinned by resilient earnings; thawing trade rhetoric, notably US-China and other negotiation breakthroughs; and dovish signals from central banks, the company says.

Additionally, global sovereign bonds also benefited from declining yields this quarter, as the US Federal Reserve resumed rate cuts.

Meanwhile, non-US equity markets, including emerging markets, outpaced the US, as the narrative shifted toward diversification away from US-centric risk.

South African equities outperformed in rand terms, powered primarily by strength in resources shares, and especially gold and platinum stocks, which benefited from sharply higher prices.

The strong rally in the third quarter by the resources sector and precious metals shares contributed to more than 80% of the JSE’s gain.

For the year to date, the South African equity market is up more than 30% and is on track for its best year in more than two decades. Return concentration has been high, with more than 80% of the return coming from just ten stocks, PPS Investments says.

Additionally, in South Africa, nominal government bonds delivered reasonable returns, despite lingering fiscal risk, with inflation-linked bonds posting similar gains.

Cash underperformed risk assets this quarter, but remains a useful ballast against volatility and for tactical deployment, the company says in its report.