Monthly economic and market review: August 2025

The local market recorded its sixth consecutive monthly gain in August as the FTSE/JSE All Share index set new records and topped 100,000 index points for the first time ever. While the headline is spectacular, the gains have not been broad-based. The market's 3.4% return in August, its best since the 3.8% gain in July 2024, was firmly propped up by the 11.5% return from the resources sector where Gold Fields (31.5%), Sasol (27.3%), Exxaro (21.0%), AngloGold (19.4%) and BHP Group (9.2%) were the star performers in the month. The resources tide didn't lift all ships in August and some of the biggest gainers in 2025 so far gave up just a little bit of ground in the month. Sibanye Stillwater lost 13.1% to be up 122.6% for the year, Implats' 7.2% loss left it up 81.7% and Northam's decline of 5.9% left it up 102.6% for the year (see the key stock price movements in the annexure below). August's positive resources story reflected how the year has progressed on the local market. In 2025 so far, the Resources index has gained 60.1% and has been the major driver of the JSE's 21.1% gain (see the chart below).

A number of banks reported fairly positive interim earnings growth in the month and that helped the Financials index to a 3.6% gain in August and a year-to-date return of 9.28%. Amongst financial stocks, Old Mutual (+8.8%), Standard Bank (+6.2%), Absa (+4.6%) and Sanlam (+4.1%) were the better performers. Industrial stocks have been the laggards and the 0.6% gain in August didn't do much to reverse the sector's 9.84% loss for the year so far. The sector remains littered with depressed "SA Inc" stocks that reflect the stagnant local economy and the associated weak business and consumer confidence.

The strength of the Resources sector this month follows strong gains in commodity prices. Gold reached new all-time highs in August to be up 31% for the year while platinum returned to prices last seen in 2014, to be up 53% in 2025. Oil prices were lower in August as the OPEC+ countries boosted production but "Dr Copper" was up in the month and up 13% for the year. The generally higher commodity prices followed the weakening dollar which slipped from $1.14/€ to $1.17/€ over the month. That weakness could be ascribed to renewed optimism that the US Federal Reserve would cut interest rates at their next meeting on the 17^th of September. The rapid shift in sentiment was brought about by an extremely poor July US jobs report where not only was the July jobs growth weak and well below expectation, but the May and June figures were also revised significantly lower. President Trump was severely irked by the report which showed that 258,000 fewer jobs had been created and called for Erika McEntarfer, Commissioner of Labor Statistics at the Bureau of Labor Statistics, to be fired. Apart from the ousting of the Commissioner, the weak jobs numbers created an immediate concern that the US economy was weakening and that the next interest rate cut would need to be expedited. The US stock market pulled back on the news on the very first day of the month but recovered very quickly after that to set fresh all-time highs during August.

Federal Reserve speakers did come across as more dovish over the month, particularly after the weak jobs data and the end-July Federal Open Market Committee meeting at which there were two dissenters (very rare) to the committee's decision to keep rates unchanged. The dovish tone of the Federal Reserve was reinforced when Chairperson Jerome Powell addressed the Jackson Hole Symposium on monetary policy towards the end of the month. The US stock market was also buoyed in the month by a better than expected second quarter earnings reporting season and more clarity on what tariffs might do to earnings going forward. With only a handful of S&P 500 stocks still to report, earnings for the quarter are up almost 12% year-on-year ("y/y") against pre-season expectations of 4.8% y/y growth. Earnings expectations have also been revised up for the remaining quarters of this year and for the year as a whole. Analysts (Factset consensus) now expect 7.5% y/y earnings growth in Q3, 7.2% y/y growth in Q4 with annual growth of 10.6% in 2025 and 13.4% in 2026.

The net impact of the realised US tariffs on the rest of the world, the weak employment data, the dovish Fed, the strong earnings reporting season, the ongoing wars and global strife and all the band standing and global politicking, was a rise in the S&P 500 index of 1.9% in August. That was the fourth consecutive monthly gain for the benchmark US index and left the index return at 9.84% for the year with a total return of 10.79% when dividends are included (see the chart below). At the end of the month, the sectors that outperformed the 1.9% gain of the S&P 500 included Materials (+5.59%), Healthcare (+5.25%), Communication Services (+3.57%), Consumer Discretionary (+3.35%), Financials (+2.98%), Energy (+2.92%) and Real Estate (+2.03%). The underperforming sectors included Utilities (-2.03%), Industrials (-0.15%), Technology (+0.27%) and Consumer Staples (+1.45%). The healthcare sector was boosted by UnitedHealth's 24.2% gain in the month after it was announced that Berkshire Hathaway had taken a stake in the company. CVS Health (+17.8%), Elevance Health (+12.6%), AbbVie (+11.3%) and Bristol-Myers Squibb (+8.9%) also contributed to the sector's outperformance in August. Despite the strong rebound in UnitedHealth Group in August, the stock remains down 38.7% for the year-to-date. Home improvement companies Lowe's (+15.4%) and Home Depot (+10.7%) both reported numbers in the month and while Lowe's beat expectations and Home Depot missed expectations, the market took confidence in the resilience of the consumer and the fairly positive company outlooks.

Some big tech names reported in the month and there were big expectations of $4 trillion mega-cap company Nvidia. The company managed to beat those expectations but not in every area and the stock lost 2.1% over the month - that could probably be considered a win given what the stock has done over the past two years. Apple results also beat expectations as the services segment continued to grow its contribution to earnings. The counter gained 11.8% in August but remains in the red for the year (-7.3%) as investors ponder what will be the next big growth lever for the company. Alphabet had a strong month (+11.0%) after inking a $10bn deal to provide cloud services to Meta. The Facebook owner lost 4.5% over the month but remains on the year's biggest winners list with a return of 26.2% - see the tables in the appendix below for some of the larger monthly and year-to-date price movements of stocks drawn from the S&P 500 index and the FTSE/JSE Top 40 index.

S&P 500 (blue, RHS) & FTSE/JSE All Share Index (green, LHS) - last 12 months

The Federal Reserve may be close to relenting and cutting interest rates come their meeting of 17 September but subsequent rate cuts can't be guaranteed. The Fed chairperson has all but teed up a rate cut for September but it comes with the well-worn proviso that the committee's decision will remain data dependant. The weak July employment report should be enough "data" to support a decision to cut rates even for a reticent Federal Reserve. The guardians of monetary policy want to set policy independently but have been attacked at every turn by President Trump for falling behind the policy easing curve (in his mind). A rate cut in September, however, wouldn't be caving into presidential demands and would be well supported by the latest data. The markets have already factored in policy easing and any disappointment on that front would not be well received by Mr Market.

There is also a chance that the data itself could see the Fed continuing to sit on its hands. The August jobs report is due in the first week of September and there will be other employment, inflation, growth and sentiment indicators out before the policy meeting that could provide a surprise, one way or another. The tariff debacle is also not yet over. Trump is facing a legal challenge on his tariffs and while the courts have ruled that he acted outside of his executive powers, there's still an appeal to come and there are still a number of tariff deals to be inked, notably one with China. Valuations on the US markets are currently above five- and 10-year historical averages and while this isn't a concern while earnings growth is there to support the valuations, any earnings disappointments could lead to some market de-rating. The outlook for the equity market continues to be positive but one must acknowledge that at higher valuation levels and record market highs and with strange relationships developing between global leadership, the short-term market risks are not zero.