The South African All Share Index is up by more than 30% since the beginning of the year. Many clients have been puzzled by this growth. Financial markets seem out of step with economic reality.
It is worth reflecting on the reasons for this apparent decoupling between financial markets and the real economy.
The first reason is that financial markets are forward-looking. Currently, markets are already factoring in that lower interest rates will boost economic growth in the medium term. Sometimes, though, markets get ahead of themselves — and this might well be the case now.
However, the more important reason is that most equity indices do not represent the broader economy. They reflect the performance of the dominant listed companies. Right now, gold once again dominates the South African market, with the top seven gold companies more than doubling in value in 2025.
It’s also important to distinguish between a good portfolio and an index. Most sensible portfolios would not have included outsized holdings in gold companies. These companies are generally considered risky investments because of the volatility and unpredictability of the gold price and the inherent risks of gold mining. It means that most balanced portfolios would have underperformed the South African share market index — probably by a wide margin. Many investors may feel that they have “missed out” on this opportunity.
The gold rally provides an opportunity to reflect on how we measure our investments. Not only is it impossible to forecast when the gold price will surge — and fall again — but we should also ask ourselves whether we want to invest our energy in chasing these kinds of high-stakes opportunities. It makes for a good story when you get it right, yet we seldom hear about the far more common outcome of getting it spectacularly wrong.
We prefer to invest our clients’ money in endeavours with better odds. That doesn’t mean our portfolios exclude gold shares (thankfully, they don’t); it simply means that those holdings are limited.
There is, however, an even deeper point here. We can question the reasons for our disappointment when we feel that we are “missing out”. What exactly are we missing out on? Feelings of regret may surface, or perhaps envy of friends or colleagues who tell us about their investment successes.
It helps to remember that these feelings are human. Even advisors experience them. But how we act on these feelings is what sets us apart in the long term.
It’s worth noting that “losing out” does not mean that you’ve lost. You may still be well on your way to meeting your own goals. Keeping your eyes firmly on your own reality and plans can help anchor you when these feelings surface.
After all, that’s what our money is for — not to make us feel good in the moment, but to help us live the life we truly desire.
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Kind regards,
Sunél