Momentum Investments’ Q1 market review & 2025 outlook

As US President Trump's aggressive transformation of the geopolitical and global trade landscape gained momentum during the first quarter of this year, a more risk-off market sentiment set in, with global equities meaningfully underperforming global bonds. For a review of the first quarter, CNBC Africa sat down with Herman van Papendorp, Head of Asset Allocation at Momentum Investments, to discuss the market shifts and outlook for 2025. Van Papendorp highlighted the impact of Trump's tariff policies on global markets, emphasizing the adjustment in market sentiment to a new framework of heightened uncertainty. The first quarter saw global equities lagging behind global bonds as investors navigated near-term risks of recession and stagflation. The US bond market emerged as a safe haven asset class, experiencing a shift in yields from the first to the second quarter, reflecting concerns of higher inflation and impacting bond returns negatively. Van Papendorp explained that President Trump's actions influenced the performance of various sectors, with a strong showing from the SA resources sector driven by commodity price underpinning. While emerging markets outperformed developed markets, South Africa's financial and listed property sectors faced pressure due to rising bond yields in a risk-off scenario. Looking ahead, Van Papendorp emphasized the importance of focusing on valuations and seeking a margin of safety in asset class exposure. With global asset classes lacking valuation support, he highlighted attractive opportunities in South African equities, bonds, and cash, pointing out the favorable real returns offered by South African nominal and inflation-linked bonds. Van Papendorp concluded by suggesting a cautious approach towards US equities and a preference for South African asset classes in the current market environment, characterized by tariff-induced volatility and geopolitical uncertainties. As the second quarter unfolds, market participants will keep a close eye on developments in Washington and assess the implications for global markets.