Navigating market paradoxes in 2026

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CIARAN RYAN: The markets are full of paradoxes at the moment. A stronger economy should feel better, but the stock market has been flat for the past year, and consumers are feeling the pressures of rising inflation, higher interest rates and fuel that now costs north of R30/litre.

Government bonds and gold should provide safety when uncertainty arises, but that’s not quite what we’re seeing.

What does this mean as we head into the final quarter of 2026 and into 2027? These are some of the market paradoxes we’re unpacking today with Adriaan Pask, chief investment officer at PSG Wealth.

Adriaan, welcome once again. Let’s start with the economy. If conditions are improving, as we are told so often, why are so many South Africans feeling squeezed – and what needs to change before that improvement reaches household budgets?

ADRIAAN PASK: Hi, Ciaran. It’s certainly the case.

I was actually making my way from Sandton very early this morning to the airport, and you can’t help but notice that all the traffic lights are out in Joburg, and the lights on the roads are out too. But then, as you sort of approach that slip off towards the airport, the guys are working on the roads from very early in the morning.

I was actually quite impressed, and it feels a little like that’s the story of our economy as well. We’re not in a very good space, but you do see some improvement on the ground.

Things like our poverty, our crime, and our unemployment are things that we’ve been struggling with for a very long time, but at the same time, we see headlines where there are reforms taking shape.

It’s been a while since we’ve had electricity disruptions, and the private sector has come to save the day.

We see some reforms taking shape on the Transnet side, which is good.

But I think it’s very difficult for the average South African to translate all those things into feeling really good because, as I say, we’ve got so many other things that still need repair.

At the same time, the average South African is facing rising interest rates, high inflation, and high fuel prices.

So it seems like there’s a disconnect: things are improving, but it doesn’t really feel like it.

I think we just need to be very mindful, as South Africans, that the issues around poverty, crime, and employment that need to improve will take a very long time, unfortunately.

At the same time, if you don’t see meaningful things being done on the ground, if people aren’t working on reforms or working with the private sector, or if you’re [not] fixing a road, then you already know you’re not on the right track.

So it does feel like we’re doing the right things, but I also think it’s going to take some time before we really start to see any visible reward for the consumer out there.

CIARAN RYAN: Now, there’s a distinction between a weak stock market and a weak investment portfolio. Are portfolios being propped up by cash returns, bonds and offshore investments that are supposed to be part of a diversified portfolio? And what risks come with those attractive cash and bond yields?

ADRIAAN PASK: I think with the stock market, what’s interesting is, for where we stand today, the stock market has essentially been flat over the last 12 months if you just invested in the index as a whole.

But what’s quite interesting is that there are large discrepancies or spreads between the different sectors.

The areas that have been struggling are really in the industrial space – some of our non-commodity rand-hedge companies – and obviously, a stronger rand would have held those back.

On the other hand, our materials and commodities companies are doing quite well; our financials are too.

So it’s very possible, even though the index is down 8% year to date, that your portfolio might actually be looking reasonably okay for one reason – obviously, the equity sector differences that I mentioned.

But the other component are the things you mentioned around cash and bonds, and those have been really supportive of client portfolios. If we look at bond returns over the last three years or so, they’ve been good.

This year, 2026, has been a little tougher on the back of two good years out of the bond market, and cash rates are still there, yielding around 7%-odd, which is inflation plus 3%, which is actually more than the long-term return out of the bond. The bonds are now yielding around 9%, which is inflation plus 6%, pretty close to where equity returns have been over the long term.

So it’s very possible that you see these equity markets not keeping pace.

But if you look at your diversified portfolio, a typical balanced fund could very well still be reasonably okay, well ahead of inflation.

So it may seem quite strange, but I think it’s a very good reminder of how a diversified portfolio can help you when something isn’t working.

One specific thing may not be working, but some of the others are carrying the weight for the time being.

CIARAN RYAN: Here’s another paradox. US government bonds have long been regarded as a safe haven. Why are they coming under pressure, and how can investors lose money on an investment they thought was safe?

ADRIAAN PASK: That’s a really interesting one.

I think for the longest time, US bond yields in particular have just been moving all the way down.

But in reality, if they go through multi-decade phases of just a structural decline – where they effectively ended off the Covid-period was around 1% – at that point, they’ve got only one way to go, and that’s up.

I think, therefore, when you reach those extremes, the asset class tends to behave a little differently. I think that’s one component of it.

The other component is if the market is also just waking up to the US itself – and we’ve spoken about this before – that also has some fiscal challenges around twin deficits, et cetera.

So it’s been a bit of a lethal cocktail for US bond investors, in that investors are [becoming more aware] of the risks, but also they were just very expensive going back five years or so.

CIARAN RYAN: Gold is another asset people buy for protection, yet its price can swing sharply, as we’ve seen over the last few months. So what does gold actually protect against?

ADRIAAN PASK: Gold, historically, similarly to bonds, has been one of the two safe-haven assets.

It’s actually strange that both of the safe-haven assets have been under significant pressure.

But again, if you look at what gold has done over the last few years, it really had a tremendous rally. It created a new peak in January.

And so it’s somewhat ironic that at a time when we see regional tensions between the US and Iran, in an environment like that, you would expect bond yields to help you to come back, bonds being bought up, and you would expect gold to rally quite hard. And neither of those has really happened.

I think it’s just on the back of valuations that weren’t accurately reflecting the realities.

Gold rallied just too much – ahead of the war tensions – to the point where there wasn’t much more the asset class could give.

So it’s somewhat strange that gold has been under pressure as a safe-haven asset in an environment that has been essentially risk-off, with investors growing increasingly tense and concerned about the escalating war.

CIARAN RYAN: With these conflicting signals, how should investors prepare? How should they put their portfolios together? And do you have any practical steps they can take to avoid relying too heavily on a single asset or a particular economic forecast?

ADRIAAN PASK: I think that’s exactly right. So often, people like me on the radio or podcasts say you need to think about a diversified portfolio. But I think, if we look back, we can now see clear evidence of how that’s been quite useful.

Markets and asset classes don’t always follow the usual playbook. We spoke about gold and bonds in particular, which didn’t behave as they typically would according to the scripted story.

And at the same time, domestic equity markets have struggled a bit. So it helps to have that diversified portfolio.

I think a really good example of what people say from an investment perspective – what’s helpful and useful – has now materialised.

That’s a really good lesson for investors – not to put all your eggs in one basket, as they would say, but to spread things a bit wider to diversify and protect yourself.

CIARAN RYAN: We’re going to leave it there. That was Adriaan Pask, chief investment officer at PSG Wealth. Thanks very much for your time, Adriaan.

Brought to you by PSG Wealth.

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