The investment markets


The second quarter of 2025 brought renewed optimism across local and global markets. In South Africa, improving economic indicators, easing power constraints, and a rebound in business confidence contributed to stronger performance on the JSE.

US:

US equities advanced in Q2, with gains driven largely by the information technology and communication services sectors. Continued investor enthusiasm around AI—supported by strong earnings and upbeat guidance—boosted related stocks. In contrast, materials and industrials underperformed.

Interest rate policy remained a central theme, shaping market sentiment throughout the quarter. The Federal Reserve held rates steady, signalling a data-dependent approach and caution around the timing of potential cuts. Early in the quarter, concerns over an overheating economy weighed on sentiment, but optimism around a potential soft landing grew as incoming data moderated.

Eurozone:

Eurozone equities declined in the second quarter, weighed down by political uncertainty and diminished expectations for aggressive monetary easing. Sentiment was shaken by the surprise announcement of snap parliamentary elections in France, which led to underperformance in French stocks and broader market volatility.

The European Central Bank implemented a 25 basis point rate cut in June—the first in the current cycle—but persistent inflation (rising to 2.6% in May) may limit the scope for further easing.

Emerging Markets:

Emerging market equities outpaced their developed market counterparts in Q2, supported by softer U.S. economic data, which eased concerns over delayed Fed rate cuts, and a rebound in China’s economy. Chinese equities rallied amid improving macro data and policy support, including a return to expansion in the Caixin manufacturing PMI in May, which reached 51.7—the highest level in nearly two years. Broader sentiment was also lifted by targeted stimulus measures aimed at reviving domestic consumption and stabilizing the property sector.

Japan:

Japanese equities posted modest gains in local currency terms, with the TOPIX Total Return Index rising 1.7%. However, yen depreciation—driven by U.S. dollar strength and expectations of prolonged higher U.S. interest rates—resulted in negative returns for foreign investors.

The Bank of Japan took steps to tighten policy slightly, including a small rise in government bond yields and a planned reduction in bond purchases starting in July. While these measures supported financial stocks, they were not enough to halt the yen’s decline.

Overall, Q2 delivered a more constructive backdrop for risk assets, fostering cautious optimism heading into the second half of the year.