Furthermore, 2024 witnessed a large divergence in global equity market performance with the SA All share index returning 15%, trailing behind China - its emerging market counterpart - which returned 20% in the year (see figure 1 below).

Adding to investors’ discomfort is the historically high valuations of the US equity market with a Price-to-earnings (P/E) ratio of 27. Which has only been higher twice in its history: once in 2021 and once before the dot com bubble in 1999. After which the S&P had drawdowns of up to 47% and 25% respectively. At Prescient, we make use of carefully crafted quantitative models to take views on assets. As of Jan 2026, we hold a neutral view on US equity with the main detracting factor being valuations (including the P/E ratio). 

 

In contrast, we have a moderately positive view on SA equities, driven primarily by valuations. The All share index currently trades at a PE ratio of 12, which is well below its median level. This underscores South Africa’s relative cheapness compared to the U.S.

Historically investors would be cautious of emerging market equity due to its relatively higher levels of volatility compared to developed markets. To examine this further, we look at 3-month implied volatility as an indicator of the market’s perception of forward-looking risk for these two indices (shown in the figure below).

 

We can see that historically volatility is slightly higher for the SA All share index, however the key finding is that they have somewhat converged recently. 
The combination of comparatively cheap South African equities and currently low volatility could attract investors seeking better risk-adjusted returns. This situation has only occurred once before - in 2021 - when the SA All Share Index subsequently outperformed the S&P 500. As a result, 2025 may well be the year in which SA equities begin to catch up on the global stage.

Disclaimer: 
Prescient Investment Management (Pty) Ltd is an authorised Financial Services Provider (FSP 612). Please note that there are risks involved in buying or selling a financial product, and past performance of a financial product is not necessarily a guide to future performance. The value of financial products can increase as well as decrease over time, depending on the value of the underlying securities and market conditions. There is no guarantee in respect of capital or returns in a portfolio. No action should be taken on the basis of this information without first seeking independent professional advice. *Representative acting under supervision. 
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