Herman van Papendorp, Head of Asset Allocation at Momentum Investments

Key financial markets review takeaways for the second quarter of 2026

• The Iran war remained the dominant influence on global markets during the second quarter of 2026, with investor sentiment swinging repeatedly between fears of further escalation and hopes for a negotiated settlement. Elevated oil prices throughout April and May pushed global inflation expectations higher and prompted markets to reassess the likely path of interest rates. Strong United States (US) economic data, especially labour market indicators, combined with more hawkish-than-expected commentary from new Federal Reserve (Fed) Chair Kevin Warsh, reinforced expectations that the next US policy move could be an interest rate hike rather than a cut.

• More bearish inflation and monetary policy expectations, together with ongoing concerns about fiscal profligacy, drove developed market (DM) bond yields to multi-decade highs, causing global bonds to produce the weakest returns among the global asset classes in the second quarter, while also weighing on precious metal prices. As a result, the gold and platinum exchange-traded funds (ETFs) were the weakest-performing investments for South African (SA) investors during the quarter.

• The decline in precious metal prices, combined with rand strength, also placed considerable pressure on SA resource shares. Although local financial and industrial companies generated positive returns, their gains were insufficient to offset losses in the resources sector, resulting in negative overall returns for the SA equity market in the period. Improving confidence that the Iran conflict would ultimately move towards resolution benefited SA fixed-income assets and listed property, with the latter ending the quarter as the best-performing local asset class.

• Global equities were the strongest-performing asset class in the quarter, supported by resilient US corporate earnings, continued enthusiasm around artificial intelligence (AI)-driven investment themes and moderating stagflation fears. Emerging markets (EM) significantly outperformed DMs, largely due to exceptional gains in semiconductor-heavy markets such as South Korea and Taiwan. Within DMs, the US delivered the strongest performance, with technology companies once again acting as the primary drivers of returns.

Key financial markets outlook takeaways

• Our overarching asset allocation positioning remains unchanged: a clear preference for SA equities, listed property and nominal bonds, complemented by selective exposure to EM equities and diversification assets like gold, while remaining cautious on global fixed income and global property. SA asset classes continue to stand out as offering undeniable value, with valuations remaining depressed relative to both history and EM peers. This creates a favourable risk-reward asymmetry for investors. For our detailed financial market outlook, please click here.

For more, read Momentum’s full note here.

ENDS