Monthly economic and market review: February 2025

New equity market highs but new market concerns

The positive market momentum of January continued into early February, carrying the FTSE/JSE All Share index to a lifetime high of 89,061.67 index points on the18th and the S&P 500 to an all-time high of 6,144.15 points on the 19^th. The new peaks couldn’t be sustained though and as US inflation picked up to 3.0%, investors began reconsidering their expectations for interest rate cuts. The imposition date of tariffs by the US on Canada and Mexico and increased tariffs on China remained something of a moving target in the month, serving only to ramp up market unease and uncertainty. The final weeks of US fourth quarter earnings reporting season were successfully negotiated and while the much anticipated earnings results of Nvidia towards month-end ticked all of the right boxes, the market’s enthusiasm for the stock waned quickly post the earnings release. With all of the uncertainty and risk to markets and economies added by President Trump’s actions and threats, the path of least resistance for equity markets was to the downside. The FTSE/JSE All Share index gave up 3.5% from its newly reached peak to close the month out almost flat (down 13 points or 0.02%) – see the blue line in the graph below. The S&P 500 closed 3.1% down from its peak to be down 1.4% for February (the green line in the chart below).

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

Source: Factset

The risk-off equity market sentiment boosted US treasuries with yields falling to their lowest level since October last year. The 10-year bond yield declined by 36 basis points in the month (4.55 à 4.19) while the two-year treasury yield declined by 29 basis points (4.20 à 3.91). Domestic bond yields ticked up in February and reached a high point following the last-minute postponement of the National Budget on the 19^th. The Government of National Unity could not agree on the proposed 2% VAT rate hike and the Budget was pulled at the eleventh hour. The yield on the R2035 government bond increased from 10.37 at end-January to 10.60 on the day after the failed Budget but improved to 10.52 by month-end. The National Budget has been rescheduled for 12 March and given that a VAT rate hike is off the cards, the government will have to find the extra R58bn elsewhere or, preferably, cut spending to keep the deficit down. The government is running a primary budget surplus but when the massive debt-servicing costs are included, the deficit widens substantially. Let’s hope that the cabinet is not doing their sums in the dark as we marked February as the month that our load-shedding-free honeymoon ended abruptly when we awoke to a Stage 6 shock (non-electric!).

Commodity prices were mixed but resources counters on the JSE were on the back foot

The US dollar was flat at $1.04/€ over the month and the gold price was also largely unchanged at its higher levels. Platinum (-9.8%), Brent crude oil (-5.6%) and coal (-11.9%) traded lower in February while copper (+4.6%) and iron ore (+5.2%) closed higher. The Resources sector (-7.1%) was the biggest declining sector on the JSE in the month with Northam (-23.6%), Sibanye Stillwater (-21.8%), Thungela Resources (-19.2%), Harmony (-15.9%), Angloplat (-14.3%, Implats (-14.1%) and Exxaro Resources (-11.1%) leading the way lower. Industrials closed 3.8% lower in February while Financials eked out a 0.8% gain as Discovery (+14.3%), Santam (+10.1%), Sanlam (+6.0%), Capitec (+3.4%) and Old Mutual (+2.5%) found themselves in the green. Sectors that outperformed the S&P 500 index’s -1.42% return in February included Consumer Staples (+5.6%), Real Estate (+4.1%), Energy (+3.2%). Healthcare (+1.4%), Financials (+1.3%), Utilities (+1.2%). Materials (-0.2%) and Information Technology (-1.4%). The underperforming sectors included Consumer Discretionary (-9.4%), Communication Services (-6.3%) and Industrials (-1.6%).

Winners fall and laggards gain on the US markets

Tesla was a notable decliner in February (-27.6%) as its electronic vehicle sales continued to fall while the sales of Chinese competitor BYD continued to grow. In 2024, BYD overtook Tesla as the world’s largest electronic vehicle producer and that trend has continued into 2025. Alphabet (-16.2%) and Amazon (-10.7%) were two other “Magnificent Seven” stocks that found themselves amongst the top 10 worst performers of the 100 largest S&P 500 stocks in February. Amazon grew 44% in 2024 and continued on to a record share price close of $242.06 in early February this year. Shortly after that peak, Amazon posted strong fourth quarter results but with a weaker outlook for the next quarter than what was expected by the market. That disappointment and the broader equity market weakness saw the share close lower at $212.28. The long-term investment case for Amazon remains in place but as the company continues to invest massively in Artificial Intelligence and cloud infrastructure for future growth, margins and profitability will be impacted in the shorter-term. The Alphabet stock price trend paints a very similar picture to that of Amazon. Alphabet added 35% in 2024 and reached an all-time high closing share price on the same day as Amazon (4^th February) at $207.71. Ongoing antitrust concerns, growing capital expenditures ($75bn in 2025), weaker equity markets and a slight miss on revenue in the fourth quarter earnings release saw the share close out the month 17% down from its peak at $172.22.

Intel, which lost 60% of its market value last year, had a resurgent February, adding 22.1% on speculation and some announcements that the company, or parts of it, could be sold or spun off. That speculation saw the share price jump 43% from $19.10 to $27.39 in seven trading days before it slipped back to $23.73 by month-end – still a far cry from the $68.26 peak reached in April 2021. Intel may be looking to do more work with Nvidia and Broadcom with its 18A chip manufacturing process but its fabrication problems have yet to be resolved. Consumer Staples led the charge in February and tobacco group Philip Morris had a smokin’ start to the year. After a solid 28% gain last year, the share reached an all-time record closing price in late February and added 19% in the month to be up 29% this year so far. The company continues to grow its sales of smoke-free products and the recent quarterly results beat expectations and came with a positive outlook for the year ahead. (See the appendix at the end for a list of top winners and losers on the JSE and the S&P 500 in February).

Investing amidst the Trump tsunami

President Trump’s first six weeks back in office have already had far-reaching implications for global economies and markets. His 75+ executive orders, his imposition of trade tariffs, his appointments into key leadership positions (and the incumbents’ actions) and his choice of political allies have muddied the investment waters and made for more complicated investment decision-making. Many have hailed Trump’s actions for their testing of the status quo and their upending of old norms and institutions but however you describe it, the investment environment has become murkier since the outcome of the November 5 polls. That’s not to say that the world was all hunky dory before the elections. The long drawn out conflicts in Ukraine and the Middle East, the slowing Chinese and European economies, the stalling of interest rate cuts and the shifting power dynamics across myriad governments all clouded the investment landscape. Investors became increasingly hardened to the daily news headlines and pushed markets to new highs as they focussed more on corporate earnings growth.

The uncertainty in markets right now is the extent to which companies, industries and economies will be impacted by trade wars, a potential resurgence in inflation, an uncertain path for interest rates, shifting exchange rates and a further move away from globalisation in favour of self-interest and self-preservation. The Trump tsunami will eventually pass and some of the investment clouds will lift, enabling us to better see how individual corporates and industries have weathered the storm and to anticipate and forecast how they might do in the future. As the waves of the tsunami buffet our markets and portfolios, its prudent to roll with it and not make drastic changes to established long-term investment strategies. That’s not to say that some changes might not be required where a particular company or industry has clearly been irrevocably altered but wholesale changes shouldn’t be considered when market visibility is poor. It can be a little scary for investors but spare a thought for the turtles who now face those plastic straws again in a gulf that shall not be named.

Appendix: Market Movers