Buhai said the stock market was not a reflection of South African GDP. Less than half of the JSE is truly domestic in nature. Around 30% is resource companies, which are now heavily skewed towards precious metals, while the remaining 25% are global-facing counters that earn hard currency. This structure means that when precious metals prices rally strongly, as has occurred this year, the local market is lifted even if the South African economy is under strain.
He reminded listeners that compulsory monthly pension fund inflows create steady demand for SA equities. Since more than half of retirement money has to be invested locally, the JSE benefits from a permanent flow of capital that supports share prices.
Van der Ross said this phenomenon was not unique to SA. He drew attention to the US, where the “Magnificent Seven” technology companies have dominated performance, leaving the rest of the index lagging. This explains why many investors feel a disconnect between record highs and their own experience of the economy. It is a reminder that index levels can disguise uneven performance beneath the surface.
Liquidity is another central theme. Buhai emphasised that vast fiscal deficits since Covid have left more money in the system than traditional models would predict. This liquidity has been a major driver of risk assets, lifting both equities and gold. Investors must recognise this dynamic rather than assuming markets are being irrational.
Van der Ross agreed. In a fiscally-dominated world, where safe government bonds may not always offer a return above inflation, investors are drawn to other assets, he said. The key risk is not change itself but the speed of adjustment. When capital shifts too quickly, instability follows.
The discussion also turned to geopolitics. Van der Ross said rising defence budgets in Europe were already shaping parts of the equity market. Buhai said central banks were diversifying into gold after the freezing of Russian reserves, which has created another layer of demand for bullion. Both agreed that these shifts will not reverse quickly and that investors must account for them in their portfolios.
On the appeal of cash, Buhai said yields look good on paper but many South African households face inflation that feels higher than the official figure, particularly when accounting for private education, healthcare and security costs. That means real returns from cash may be less compelling.
Van der Ross said bonds still offered attractive yields while equities, despite their risk, remained the engine of long-term wealth. The right answer is not to choose one over the other but to hold a balanced mix.
Both fund managers stressed the importance of process. They said investors should lean modestly into risk while earnings expectations remain broadly positive, but also use hedges when appropriate. Defence stocks in Europe, gold as a store of value and selective equity positions all form part of that toolkit. The real danger, they believe, is reacting impulsively to headlines rather than following a disciplined framework.
Markets and economies do not march in step, and that is not necessarily a problem. It creates opportunity for those who understand what is really driving performance. Investors are reminded to focus on liquidity, earnings and structural shifts rather than the noise of daily news flow. The message is simple: stay invested, stay diversified and let discipline guide the journey.
