August presented a mixed global picture. The United States recorded stronger job creation, while China’s recovery remained uneven and eurozone inflation increased as energy prices rose. Despite these cross-currents, many global equity markets ended the month higher. 

Closer to home, South African inflation slowed in July as fuel prices fell, and private-sector activity expanded slightly in August. The rand strengthened and the local share market delivered a strong headline return, although gains were concentrated in resources companies. 

Global economy: Uneven growth and renewed inflation pressure

The global economy continued to balance slowing inflation, economic growth and interest-rate expectations. Higher oil and gas prices added inflationary pressure in several developed economies, while economic performance varied across regions.

The US saw stronger job creation, China continued to face weak domestic demand, and parts of Europe experienced rising inflation linked to energy costs. Higher bond yields also reflected ongoing concerns about inflation and future economic growth.

What this means for you: Global economic conditions remain mixed, which can create periods of market volatility. Diversified portfolios remain important when different regions and sectors perform differently.

United States: Job creation rebounds

The US economy added 162,000 jobs in August, the strongest monthly increase in five months, while unemployment remained steady at 4.1%.

Inflation rose to 3.4% in July, while economic growth slowed compared with earlier in the year. Expectations remain that interest rates could stay higher for longer as policymakers continue to monitor inflation trends.

What this means for you: A resilient labour market supports consumer spending, but higher inflation and borrowing costs may continue to influence investment markets and economic growth.

China: External strength, but weak domestic demand

China’s economy remained divided between strong export growth and weaker domestic activity. While exports continued to perform well, consumer spending, investment activity and the property sector remained under pressure.

Policymakers introduced targeted support measures, but growth is still expected to remain subdued, with further interest-rate cuts possible later this year.

What this means for you: China’s economic performance remains important for global trade and commodity demand. Slower domestic growth could affect emerging markets and commodity-related investments.

Europe: Energy lifts inflation

Eurozone inflation rose to 3.3% in August, largely because of higher oil and gas prices. However, underlying inflation pressures eased, suggesting that broader price increases remain relatively contained for now.

In the UK, the services sector continued to show resilience, with business activity expanding during the month.

What this means for you: Energy prices remain a key factor influencing inflation, interest-rate expectations and market sentiment. Encouragingly, underlying inflation trends have continued to improve.

Japan: Foreign reserves decline sharply

Japan’s foreign exchange reserves recorded a significant decline during August, reflecting large-scale efforts to support its currency.

What this means for you: Currency movements can influence offshore investment returns when converted back into rand, even if the underlying investments perform well.

South Africa: Inflation slows and activity improves slightly

South Africa’s annual inflation rate slowed to 4.3% in July from 5.0% in June, coming in below expectations. Lower fuel prices were the primary driver, helping to reduce transport costs and ease overall price pressures.

The South African Reserve Bank kept interest rates unchanged, while business activity improved slightly, with the private sector showing modest expansion during August.

What this means for you: Lower fuel prices have provided some relief for consumers, but household budgets continue to face pressure from transport, electricity and other living costs. Interest rates remain stable, but significant rate relief should not be assumed in the near term.

Markets: Positive returns, but uneven performance

Global markets

Global share markets ended August higher, supported by changing expectations around economic growth and interest rates. Developed and emerging market shares both delivered positive returns, while global bonds produced modest gains. Listed property remained under pressure.

What this means for you: Different asset classes perform differently over time. A diversified portfolio can help reduce risk while still providing exposure to growth opportunities.

Domestic markets

The FTSE/JSE All Share Index gained 4.65% during August, making it one of the strongest-performing major markets for the month. However, most of the gains came from the resources sector, while financial and industrial shares ended lower.

The rand strengthened against major currencies, which can reduce the rand value of offshore investments over the short term.

What this means for you: Strong headline market returns do not always reflect broad-based gains. Diversification across sectors and asset classes remains important, particularly when market performance is concentrated in a single sector.

Key takeaways for investors

  • US job growth strengthened, but inflation and interest-rate uncertainty remain important risks.
  • China’s exports stayed resilient, while domestic demand and the property sector remained under pressure.
  • Higher energy prices pushed eurozone inflation higher, although underlying inflation eased.
  • South African inflation slowed and business activity improved modestly.
  • Global and local equity markets delivered positive returns, with local gains largely driven by resource companies.

Why this matters for your financial plan

Economic conditions and market sentiment can change quickly as investors respond to developments in inflation, interest rates, growth and global events. August highlighted how different regions, sectors and asset classes can experience very different outcomes within the same environment.

While short-term uncertainty is a normal part of investing, maintaining a long-term perspective and a well-diversified investment strategy can help manage changing market conditions. If you are unsure how recent developments may affect your portfolio, speak to your financial adviser before making any investment decisions.

Disclaimer

Graviton Financial Partners (Pty) Ltd and Sanlam Multi Manager International (Pty) Ltd are authorised financial services providers in terms of the Financial Advisory and Intermediary Services Act, 2002. Past performance is not necessarily a guide to future performance.

The information in this document is provided for information purposes only and should not be construed as financial advice. The value of investments and income may vary and is not guaranteed. Changes in currency exchange rates may cause the value of investments to fluctuate. While every effort has been made to ensure the accuracy and reasonableness of the information contained in this document, Graviton Financial Partners (Pty) Ltd, Sanlam Multi Manager International (Pty) Ltd, their shareholders, subsidiaries, agents, officers, and employees do not accept liability for any direct, indirect, or consequential loss arising from the use of, or reliance on, the information provided.