September Market Update: Rising Rates and Global Uncertainty Test Investors

September proved to be a far more challenging month for financial markets, with investors navigating renewed inflation concerns, rising interest rates, geopolitical uncertainty and significant volatility across global bond and equity markets.

After a particularly strong August, South African equities came under pressure as the precious-metals rally lost momentum and global investors reassessed the outlook for interest rates. Internationally, technology shares remained relatively resilient, but rising government bond yields and renewed inflation concerns created a more difficult environment for broader markets.

September was another reminder that financial markets rarely move in a straight line and that periods of strong performance are often followed by periods of consolidation and volatility.

JSE Performance in September

The Johannesburg Stock Exchange experienced a sharp reversal during September.

The FTSE/JSE All Share Index declined approximately 6.7%, falling from 116,257 at the end of August to approximately 108,507 by 30 September.

This followed the strong gains recorded during August, when precious-metal shares had been one of the major drivers of the local market.

The decline accelerated during the second half of September as investors responded to higher global interest rates, renewed inflation concerns and increased volatility in commodity markets.

Despite the difficult month for equities, the rand remained relatively resilient and traded at approximately R16.33 to the US dollar towards the end of September.

Key Drivers of the Local Market

Interest Rates Move Higher

One of the most significant developments during September was the South African Reserve Bank's decision to increase the repo rate by 25 basis points to 7.25%, effective from 25 September.

The decision was unanimous.

The Reserve Bank highlighted renewed inflation risks arising particularly from higher fuel prices, geopolitical instability and rising global interest rates.

Higher interest rates can place pressure on consumers and businesses through increased borrowing costs, while also influencing valuations across equity, property and bond markets.

Inflation Edges Higher

South African annual consumer inflation increased slightly from 4.3% in July to 4.4% in August.

While the increase was relatively modest, the underlying picture remains mixed.

Goods inflation moderated to 3.3%, while services inflation increased to 5.1%. Housing, transport and financial services remained important contributors to overall inflation.

The Reserve Bank has also warned that renewed increases in fuel prices could push headline inflation above 5% later in the year.

Rand Remains Resilient

Despite considerable global uncertainty, the rand remained relatively resilient during September.

The currency traded around R16.33 to the US dollar towards month-end, providing some protection against the inflationary impact of higher international commodity and import prices.

The rand continues to be influenced by global risk appetite, commodity prices, international interest rates and developments within the South African economy.

South African Economic Snapshot

Economic Growth

South Africa's economy contracted by 0.2% during the second quarter of 2026, following six consecutive quarters of economic expansion.

Weakness in mining contributed to the contraction, while the tertiary sector recorded modest growth.

The South African Reserve Bank now expects economic growth of approximately 1.2% for 2026, although it continues to expect a recovery during the second half of the year.

Inflation

Headline inflation currently stands at 4.4%.

Although food inflation remains relatively contained, higher energy and fuel costs have become an increasing concern.

The stronger rand has helped limit some imported inflation, but global energy markets remain a significant risk.

Interest Rates

The increase in the repo rate to 7.25% demonstrates the Reserve Bank's continued focus on controlling inflation.

The SARB indicated that its current modelling suggests rates could remain broadly stable for the remainder of 2026, although future decisions will continue to depend on inflation, economic conditions and global developments.

For households and businesses, this means borrowing costs are likely to remain elevated in the near term.

Global Market Overview

September was characterised by a significant increase in global bond yields.

The yield on the benchmark 10-year US Treasury moved above 5.2%, reaching levels last seen in 2007.

Rising government borrowing, persistent inflation concerns and expectations of tighter monetary policy contributed to the increase.

Higher bond yields create competition for equities because investors can earn increasingly attractive returns from lower-risk government securities.

Despite these pressures, US equity markets proved relatively resilient.

The S&P 500 was broadly flat for September, while the technology-heavy Nasdaq Composite gained approximately 2.5%.

Technology and artificial-intelligence-related companies continued to attract investor interest, helping the Nasdaq outperform the broader market.

However, performance beneath the surface was significantly more mixed, highlighting the importance of diversification rather than relying on a small number of large technology companies.

Gold and Commodities

Gold, which had performed exceptionally strongly earlier in the year, experienced a notable pullback during September.

Gold futures declined by approximately 6.6% during the month as rising US Treasury yields and a stronger US dollar reduced some of the appeal of non-interest-bearing assets.

Oil prices remained another major focus for markets.

Geopolitical tensions and disruptions to global energy supplies contributed to renewed oil-price volatility, increasing concerns that higher energy costs could keep inflation elevated for longer.

For South African investors, commodity movements remain particularly important because of the significant weighting of mining and resource companies within the local equity market.

What This Means for Investors

September reinforced several important investment principles:

Markets don't move in straight lines. August delivered particularly strong local equity returns, while September saw a meaningful reversal. Short-term movements should always be viewed within the context of a longer-term investment strategy.

Diversification remains essential. South African equities, US technology shares, bonds, currencies and commodities all behaved differently during September.

Interest rates matter. Higher interest rates affect borrowing costs, property markets, bond prices and equity valuations. Investors should expect markets to continue reacting to changes in inflation and interest-rate expectations.

Avoid making emotional investment decisions. Periods of market weakness can be uncomfortable, but changing a long-term investment strategy in response to short-term volatility can often be counterproductive.

Remain focused on your financial plan. Investment decisions should ultimately be driven by your objectives, investment horizon and risk profile rather than the performance of markets over any single month.

Looking Ahead

As we move into the final quarter of 2026, investors will continue to monitor inflation, interest rates, oil prices and geopolitical developments closely.

Locally, the impact of higher interest rates on households and businesses will be important, while investors will also be watching for signs of an economic recovery following the contraction recorded during the second quarter.

Internationally, the direction of US interest rates and bond yields will remain a major influence on global markets. Artificial-intelligence investment continues to support parts of the technology sector, but elevated valuations and increasingly high bond yields could contribute to further volatility.

Periods like September demonstrate why disciplined financial planning remains so important.

At ReWealth, we believe successful investing isn't about predicting every market movement. It's about building an appropriately diversified strategy, remaining disciplined through periods of uncertainty and ensuring your investments continue to support your long-term financial objectives.

If you have any questions about your portfolio or would like to review your financial plan, please don't hesitate to contact your ReWealth financial adviser.

This article provides general information and does not constitute personalised financial advice.