What we learnt from the markets in 2024

The local stock market was its typical volatile self in 2024, shifting as investor sentiment improved following the inauguration of the Government of National Unity. Investors were exceptionally cautious ahead of the election because of concern that the country could enter a business-unfriendly environment.

The rand seesawed, benefiting initially from the positive local market outlook as well as a move into risk as the US Federal Reserve cut interest rates.

Then it took a hit in early November after Donald Trump won the US election to be the next US president. International political events, such as governments in both France and Germany collapsing, continue to affect the local stock market.

Resilience wins in the end

Old Mutual Wealth investment strategist, Izak Odendaal, says, despite the uncertainty, surprises and moments of angst over the past 11 months, 2024 shaped up to be a good year for domestic investors.

“With inflation averaging 4.5 percent this year, we are looking at double-digit real returns from global equities (in rands), local equities and bonds. In the case of the latter, it is shaping up to be the best calendar year in the past two decades. Coming off a low base, local listed property returns have also shot the lights out,” he notes.

For the year-to-date period, global equities, as measured by the MSCI World Index, returned approximately 22.37 percent, while South African small cap equities, returned 31.2 percent, Mandisa Zavala, head of asset allocation at AlexForbes says.

Wayne Mostert, managing director at ASI Wealth, says despite economic uncertainty, the local and global markets have remained resilient – the JSE has, over the past few years, weathered persistent load-shedding, the volatile rand and ongoing global tensions. This past year, as the local economic outlook improved, the market rewarded long-suffering South African companies.

Stay the course

Investors who didn’t try to play the markets this past year benefitted from the typical smoothing out of equity returns, reinforcing the lesson that it pays to invest for the long-term as speculative trading is often a losing wicket.

“The unpredictable swings of 2024 served as a stark reminder that chasing market trends or reacting impulsively to short-term movements can erode wealth. Those who resisted the temptation of short-term speculation instead capitalised on emerging opportunities and reaped sustainable gains,” Zavala says.

As an example of investors who chased quick money only to get bitten, she provides the experience of people who flocked into the Chinese market, on the back of the stock market revival at the start of the year.

They were punished a month later as the market then fell all the way into the second half of the year. “This highlighted the perils of impulsive decision-making and underscored the superiority of long-term investment strategies rooted in fundamental analysis,” she says.

Zavala adds that “historical data, including recovery periods after market crashes, reiterates that long-term growth is achievable by weathering short-term volatility”.

Invest for inflation-beating growth

This year also underscored the critical role of inflation-beating asset classes such as equities in sustaining the purchasing power of your savings and helping you to achieve your financial goals, she says.

Wayne Mostert, managing director at financial advisory firm, ASI Wealth, says market volatility is “part and parcel of investing”. Staying the course rather than of trying to time the market’s ups and downs is key, as your investments stabilise when conditions improve, he says.

Investing in equities typically comes with volatility but taking on this risk is essential to achieving above-inflation growth.

“The primary lesson has been to resist the urge to react impulsively to short-term market fluctuations. Investors who remained committed to their strategies often reaped the rewards of compounding returns and a gradual market recovery,” he adds.

As Zavala notes, as in years past, fear and greed dictated many investor missteps in 2024. “Knee-jerk reactions – such as liquidating portfolios during downturns or flocking to cash investments in moments of panic – resulted in missed opportunities.”

Instead, she advocates remaining steadfast and disciplined during turbulent period.

Take a holistic approach

The age-old maxim of not having all your eggs in one basket held true this year again. A diverse portfolio helps eliminate the seesaw effects of various headwinds that shift investors sentiment and, thus, the value of currencies and shares.

Diversification is non-negotiable, says Zavala. “A well-diversified portfolio once again proved its worth. By spreading investments across asset classes and geographies, investors effectively mitigated risk and unlocked growth opportunities.

“In South Africa, the easing of load-shedding and the establishment of the Government of National Unity improved the country’s forward-looking economic outlook. Local investors who stayed the course were rewarded with robust returns; even as global markets wrestled with heightened uncertainty,” she says.

Mostert also encourages investors to diversify. “Diversification remains a cornerstone of resilient investing, particularly in a dynamic environment marked by local challenges and global shifts.”

Tips Mostert provides for diversification include:

• Spread your risk across asset classes: In South Africa, a diversified portfolio includes equities, bonds, property, and cash. This approach mitigates risk by ensuring that a downturn in one asset class doesn't derail the entire portfolio.
  
  
• Look beyond borders: While local investments are essential, global diversification is equally crucial to hedge against currency volatility and benefit from opportunities in more stable economies. Consider using exchange-traded funds (ETFs) to access international markets cost-effectively.
  
  
• Balance sector exposure: Diversification also means spreading investments across various sectors, such as financials, technology, and consumer goods, to reduce vulnerability to sector-specific risks.

Odendaal says “anything could happen in 2025. That is why diversification will remain important, as always”.

The Anchor investment team notes that moderating inflation, falling interest rates and healthy US economic momentum is what really mattered in 2024. “Looking under the bonnet, it was clear that navigating 2024 profitably was trickier than the headline index returns imply.”

Be watchful looking ahead

Bianca Botes, director at Citadel Global, says investment managers and policymakers alike need to remain vigilant in 2025.

Odendaal doesn’t expect next year to repeat 2024’s returns, since markets don’t move up in straight lines.

Botes says: “In a year characterised by so much unpredictability, one lesson stands out: adaptability is not just an advantage; it’s a necessity. As the world continues to grapple with rapid change, financial markets will remain both a barometer and a driver of broader economic dynamics. Here’s to a new year, filled with both challenges and opportunities, one to navigate with foresight and resilience.”

As this year illustrated, your best bet as an investor is to remain in diversified investments where professional managers can adapt to changing economic trends – and expect to endure some volatility on the road to inflation-beating returns.