COLUMN - The JSE All Share Index and the S&P 500 are both up for the year. In fact, so are the UK and European markets, which may feel surprising given everything going on globally.
Energy prices are rising, and there is ongoing geopolitical tension in places like Ukraine and Iran.
Just last month, we saw markets fall sharply at the start of the Iran conflict, much like we did last year April when tariffs were introduced. In both cases, however, markets recovered, with a sharp rebound after the tariff-related sell-off and a similar recovery following the recent dip linked to the Iran conflict.
You may have seen headlines suggesting that markets “don’t make sense” given the state of the world. It’s easy to get pulled into that narrative.
But if we step back and focus on what actually drives markets, it comes down to one simple question: are companies growing their earnings?
If they are, then over time share prices tend to rise, or those profits are paid out as dividends.
With that in mind, take some time to consider the table below, taken from Anchor Capital’s latest strategy document. It shows expected earnings growth across different regions and sectors over the next two years -
Is it so surprising that stock markets around the world are up for the year?
- The Nasdaq Composite (tech sector in the US) is expected to grow earnings by around 40% over the next year.
- Emerging markets, which include South Africa, are expected to grow earnings by over 40%
- The S&P 500 (US market companies) is expected to grow earnings by over 20%.
These are very strong numbers, and over time, when earnings grow, markets tend to follow.
However, it’s important to add a note of caution here. Strong earnings forecasts do not guarantee market returns. The stock market reflects future expectations, and much of this growth is already built into current prices. It’s one of the reasons markets have held up so well this year.
So, while the outlook is positive, it doesn’t necessarily mean the market will continue to rise from here. That positive expectation is already in the price.
The real takeaway is that the future is unpredictable. Rather than trying to predict what comes next, it is far more valuable to focus on what we can control: a solid structure, a clear process, and a plan you can stick with.
From there, the goal is to make measured adjustments as the world evolves, without losing that foundation.
Feel free to reach out if you’d like to chat about your own situation.
Matthew Matthee has a wealth management business that specialises in retirement planning and investments. He writes about financial markets, investments, and investor psychology. He holds a Masters Degree in Economics from Stellenbosch University and a Post Graduate Diploma in Financial Planning from UFS. [email protected]
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