Despite ongoing global uncertainty, 2025 has brought several encouraging economic developments – both in South Africa and across emerging markets. These improvements have supported household finances, strengthened long-term investment prospects and opened new opportunities for diversified portfolios.
Global markets have also performed exceptionally well this year. While the investment environment has been influenced by shifting trade dynamics and evolving global monetary policies, markets have continued to deliver strong returns despite these challenges.
There is growing optimism in both local and international markets – a weaker dollar and a more supportive rate environment are laying the foundations for a new era. After the dominance of US exceptionalism, the opportunity set is widening not only across emerging market equities, but also in select developed regions where valuations have reset and fundamentals are improving. Historical returns compared with expected forward returns suggest investors could face a markedly different outlook than the one that shaped the past decade. The challenge now is not whether capital will be deployed, but how and when to deploy it.
Below is a summary of the most impactful trends shaping the outlook for 2026 and beyond; locally and in other emerging markets:
- Lower Inflation Target = More Buying Power for South Africans
South Africa’s new 3% inflation target is a major reform that slows price increases, protects household purchasing power and allows for lower interest rates over time. This creates room for stronger real wage growth, cheaper borrowing for both households and businesses and improved economic activity.
- The Weaker US Dollar Is Working in South Africa’s Favour
The weaker US dollar in 2025 has reduced import costs, supported lower inflation, and strengthened emerging-market performance, all of which benefit South Africa. A more stable rand is also attracting renewed foreign investment into local bonds and equities.
- Government Borrowing Costs Are Finally Falling
With fiscal improvements, grey list removal and better economic momentum, South Africa’s borrowing costs have started to decline for the first time in over a decade. This frees up government resources for essential services and infrastructure while creating a healthier financial environment for businesses and households.
- Emerging Markets Are Back in Focus
Global investors are increasingly turning to emerging markets, which now offer stronger economic growth, healthier balance sheets and higher yields compared to developed markets. Countries such as India, China, and regions across Southeast Asia and Latin America are driving renewed confidence in EM equities and private markets.
- What This Means for Investors
The combination of lower inflation, a steadier rand, falling interest rates, improved government finances and stronger emerging markets creates a far more supportive environment for long-term investors. This should enhance disposable income, strengthen investment returns, and make global diversification – especially into emerging markets – even more rewarding.
You will notice a similar trend across our house-view global funds with most having reduced their exposure to the US over the past year. There has been a clear shift toward Asia and Europe and investors have benefited from this repositioning – this is evident in the performance figures included in the quarterly reviews.
As we approach the end of another eventful and successful year, we remain deeply grateful for your trust and partnership. It has been a year of meaningful progress, both structurally for the country and strategically for global markets. We look forward to continuing this journey with you in 2026 – navigating opportunities, managing risks, and supporting you in achieving your long-term financial goals. We extend our warmest wishes to you and your loved ones for a peaceful, joyful and blessed festive season.
Warm regards,
Stacey & The Finlaw Team
Finlaw Consulting
