<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
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.<\/p>\n
Government bonds and gold should provide safety when uncertainty arises, but that\u2019s not quite what we\u2019re seeing.<\/p>\n
What does this mean as we head into the final quarter of 2026 and into 2027? These are some of the market paradoxes we\u2019re unpacking today with Adriaan Pask, chief investment officer at PSG Wealth.<\/p>\n
Adriaan, welcome once again. Let\u2019s start with the economy. If conditions are improving, as we are told so often, why are so many South Africans feeling squeezed \u2013 and what needs to change before that improvement reaches household budgets?<\/p>\n
ADRIAAN PASK: Hi, Ciaran. It\u2019s certainly the case.<\/p>\n
I was actually making my way from Sandton very early this morning to the airport, and you can\u2019t 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.<\/p>\n
I was actually quite impressed, and it feels a little like that\u2019s the story of our economy as well. We\u2019re not in a very good space, but you do see some improvement on the ground.<\/p>\n
Things like our poverty, our crime, and our unemployment are things that we\u2019ve been struggling with for a very long time, but at the same time, we see headlines where there are reforms taking shape.<\/p>\n
It\u2019s been a while since we\u2019ve had electricity disruptions, and the private sector has come to save the day.<\/p>\n
We see some reforms taking shape on the Transnet side, which is good.<\/p>\n
But I think it\u2019s very difficult for the average South African to translate all those things into feeling really good because, as I say, we\u2019ve got so many other things that still need repair.<\/p>\n
At the same time, the average South African is facing rising interest rates, high inflation, and high fuel prices.<\/p>\n
So it seems like there\u2019s a disconnect: things are improving, but it doesn\u2019t really feel like it.<\/p>\n
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.<\/p>\n
At the same time, if you don\u2019t see meaningful things being done on the ground, if people aren\u2019t working on reforms or working with the private sector, or if you\u2019re [not] fixing a road, then you already know you\u2019re not on the right track.<\/p>\n
So it does feel like we\u2019re doing the right things, but I also think it\u2019s going to take some time before we really start to see any visible reward for the consumer out there.<\/p>\n
CIARAN RYAN: Now, there\u2019s 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?<\/p>\n
ADRIAAN PASK: I think with the stock market, what\u2019s 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.<\/p>\n
But what\u2019s quite interesting is that there are large discrepancies or spreads between the different sectors.<\/p>\n
The areas that have been struggling are really in the industrial space \u2013 some of our non-commodity rand-hedge companies \u2013 and obviously, a stronger rand would have held those back.<\/p>\n
On the other hand, our materials and commodities companies are doing quite well; our financials are too.<\/p>\n
So it\u2019s very possible, even though the index is down 8% year to date, that your portfolio might actually be looking reasonably okay for one reason \u2013 obviously, the equity sector differences that I mentioned.<\/p>\n
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\u2019ve been good.<\/p>\n
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.<\/p>\n
So it\u2019s very possible that you see these equity markets not keeping pace.<\/p>\n
But if you look at your diversified portfolio, a typical balanced fund could very well still be reasonably okay, well ahead of inflation.<\/p>\n
So it may seem quite strange, but I think it\u2019s a very good reminder of how a diversified portfolio can help you when something isn\u2019t working.<\/p>\n
One specific thing may not be working, but some of the others are carrying the weight for the time being.<\/p>\n
CIARAN RYAN: Here\u2019s 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?<\/p>\n
ADRIAAN PASK: That\u2019s a really interesting one.<\/p>\n
I think for the longest time, US bond yields in particular have just been moving all the way down.<\/p>\n
But in reality, if they go through multi-decade phases of just a structural decline \u2013 where they effectively ended off the Covid-period was around 1% \u2013 at that point, they\u2019ve got only one way to go, and that\u2019s up.<\/p>\n
I think, therefore, when you reach those extremes, the asset class tends to behave a little differently. I think that\u2019s one component of it.<\/p>\n
The other component is if the market is also just waking up to the US itself \u2013 and we\u2019ve spoken about this before \u2013 that also has some fiscal challenges around twin deficits, et cetera.<\/p>\n
So it\u2019s 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.<\/p>\n
CIARAN RYAN: Gold is another asset people buy for protection, yet its price can swing sharply, as we\u2019ve seen over the last few months. So what does gold actually protect against?<\/p>\n
ADRIAAN PASK: Gold, historically, similarly to bonds, has been one of the two safe-haven assets.<\/p>\n
It\u2019s actually strange that both of the safe-haven assets have been under significant pressure.<\/p>\n
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.<\/p>\n
And so it\u2019s 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.<\/p>\n
I think it\u2019s just on the back of valuations that weren\u2019t accurately reflecting the realities.<\/p>\n
Gold rallied just too much \u2013 ahead of the war tensions \u2013 to the point where there wasn\u2019t much more the asset class could give.<\/p>\n
So it\u2019s 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.<\/p>\n
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?<\/p>\n
ADRIAAN PASK: I think that\u2019s 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\u2019s been quite useful.<\/p>\n
Markets and asset classes don\u2019t always follow the usual playbook. We spoke about gold and bonds in particular, which didn\u2019t behave as they typically would according to the scripted story.<\/p>\n
And at the same time, domestic equity markets have struggled a bit. So it helps to have that diversified portfolio.<\/p>\n
I think a really good example of what people say from an investment perspective \u2013 what\u2019s helpful and useful \u2013 has now materialised.<\/p>\n
That\u2019s a really good lesson for investors \u2013 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.<\/p>\n
CIARAN RYAN: We\u2019re going to leave it there. That was Adriaan Pask, chief investment officer at PSG Wealth. Thanks very much for your time, Adriaan.<\/p>\n
Brought to you by PSG Wealth.<\/p>\n
Moneyweb does not endorse any product or service being advertised in sponsored articles on our platform.<\/p>\n
#Navigating #market #paradoxes<\/p>\n","protected":false},"excerpt":{"rendered":"
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