Navigating the JSE these days must feel like a white-knuckle rollercoaster ride for money managers. Recent market swings have been nothing short of dramatic.
In early April, the JSE had a downturn reminiscent of the Covid era, erasing nearly R1-trillion from its market value. This was after US President Donald Trump imposed ill-conceived trade tariffs, some of which have since been temporarily reversed.
Tensions within the GNU and the prospect of it unravelling over the national budget also contributed to the JSE rout. Underscoring this, the JSE all share and top 40 indices — the broadest measures of the South African stock market performance — each fell as much as 5% in a single trading session.
While some money managers responded with a sell-off, others saw it as a buying opportunity. However, in a stunning turn of events, the JSE has since recovered strongly.
Even the top 40 — which houses must-haves such as Shoprite, Woolworths, Clicks and Mr Price — reached a record high of 83,000 points on April 16 but has since retreated.
It has been an absolute boon over the past few weeks for investors in gold, gold-backed ETFs and gold miners. During April, Harmony Gold, AngloGold Ashanti, Pan African Resources, Gold Fields, and Sibanye-Stillwater all recorded remarkable share price gains. At their peak during the month, Harmony Gold surged by 55%, AngloGold Ashanti climbed 40%, Pan African Resources rallied 29%, Gold Fields advanced 27%, and Sibanye-Stillwater was up 21%. On a year-to-date basis, the gains for these counters have been staggering, further highlighting the extraordinary rally seen in April.
The recovery of the local bourse has been fuelled largely by the rally in gold shares, driven by rising global gold prices. Adding to this has been a sector that many money managers had long been bearish about, but now appears to be staging a comeback — retail.
Clicks has gained more than 10% since Trump’s tariff announcement. Other retail counters have followed suit, including TFG (15%), Woolworths (13%), Mr Price (12%), Pepkor (11%), Pick n Pay (8%), Dis-Chem and Truworths (7%), Boxer (4%), Lewis and Spar (1%).
During the JSE’s meltdown after Trump imposed tariffs on all goods from US trading partners, retail shares were largely spared from the sell-off. Even the shares that were hit hard — mainly Pepkor and TFG — have since recovered.
Though South African retailers have limited direct exposure to the US, they could face knock-on effects from Trump’s protectionist regime. Their import costs could increase due to global market instability and a volatile rand, which has depreciated in response to the economic uncertainty.
Our retailers are very good operators, and I suspect they will continue to perform OK. They will continue to move in cycles
— Casparus Treurnicht
Despite this uncertainty, some market watchers believe that the prospects for the retail sector are bright. Casparus Treurnicht, portfolio manager at Gryphon Asset Management, is cautiously optimistic. “Our retailers are very good operators, and I suspect they will continue to perform OK. They will continue to move in cycles,” he says.
The cautious part of his optimism is that South Africa’s economy and consumer spending are still in the doldrums, which will affect the earnings of retail companies and, in turn, their share price performance.
Before Trump’s second term, the outlook for the local economy looked rosy. Economic growth of 3% from 2025 could finally be imagined, thanks to fading Eskom blackouts, progress in tackling the logistics crisis and improved business confidence after the formation of the GNU, which committed to continuity of business-friendly policies and respect for the constitution.
This positive sentiment seemed set to benefit retail companies, and their profitability was on track to recover after being depressed over the past three to five years, says Treurnicht. Less load-shedding would allow retailers to cut spending on diesel for generators and redirect funds towards investment and growth initiatives. Furthermore, two-pot retirement withdrawals, easing consumer inflation and interest rate cuts were expected to boost real household incomes.
“This had an impact on the share price returns of retailers,” says Treurnicht.
However, these gains are now being reversed as several economists are downgrading their economic outlook for 2025. Trump’s tariffs could dampen global demand, stoke inflation, slow interest rate cuts, and weaken the rand. This has led the Reserve Bank to lower its 2025 GDP growth forecast to 1.7% from 1.8%. Investec chief economist Annabel Bishop has suggested a worst-case GDP scenario of 1.3%.
So, where does that leave the retail sector and the broader local market?
Treurnicht expects that retail shares will continue to muddle along, facing a tougher base due to the altered economic conditions. Apparel retailers have underperformed food retailers, as they are more reliant on discretionary consumer spending. The pace and extent of fuel price decreases, interest rate cuts, employment growth, and real wage growth will all influence retail sales and profitability.
Retail sales are already under pressure, as seen in the latest figures from Stats SA, which Anchor investment analyst Steph Erasmus describes as “disappointing”. Retail sales rose 3.9% year-on-year in February after rising 7% in January. Retail sales fell 1.3% month-on-month in February.
Erasmus says recent tensions within the GNU have dented market confidence, making the retail sector’s outlook uncertain. “A VAT increase would [have] been negative for retailers. However, recent news about the GNU [not collapsing] has been positive,” he says.
He believes certain retail shares are at attractive levels. As an investment house, Anchor favours Mr Price and Woolworths.
Erasmus highlights Mr Price’s strong start to 2025, with the retailer pencilling in double-digit sales growth and improved profitability. He says Mr Price is set to benefit from the government’s recent introduction of higher taxes on Shein and Temu imports, aimed at levelling the playing field.
He cites the strong performance of Woolworths’ food division and the positive turnaround in the retailer’s Country Road Group subsidiary, as well as its fashion, beauty and home segment.
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