South African investors missing out on the greatest wealth creation machine that has ever existed

Despite the ongoing Middle East war, the S&P 500 continues to reach record highs week after week, while the JSE is missing out on the equity market rally.

This is due to the JSE’s heavy skew toward mining firms with limited exposure to the large-cap technology stocks that are driving the S&P 500 to new highs.

The S&P 500 is up over 9.3% in the year to date, and up just over 9% since the Iran war broke out at the end of February.

Anchor Capital fund manager Peter Little explained that global equities bounced back strongly in April, which drove the global equity benchmark back into positive territory for the year. 

“It was the best monthly performance for global equities since the announcement of effective Covid-19 vaccines in late 2020,” he said. 

Notably, this April rally was driven by United States mega-cap tech shares, which were amongst the best performers in April. 

Little explained that the initial catalyst for the surge in equities was the US announcement on 7 April of a two-week ceasefire with Iran, while robust US corporate earnings helped sustain the positive momentum. 

More than 60% of S&P 500 companies reported their results for the first quarter of 2026 during April, which showed aggregate earnings growth of 28% year-on-year.

Little specifically highlighted Alphabet (Google), Amazon and NVIDIA as the largest contributors to April’s index performance.

This is not unusual for the S&P 500, which is considered one of history’s most reliable wealth creation machines.

Aubrey Capital Management’s Tom Dalrymple previously explained that many of the best trading days in the S&P 500 in recent years have followed geopolitical events.

For example, in early 2020, the outbreak of the Covid-19 pandemic saw the S&P 500 fall 33.9% in just 33 days.

However, by the end of 2020, the index had not only recovered those losses but finished the year with a strong 16.26% total return.

The S&P 500’s performance over the past six months can be seen in the graph below, including the notable dip in March and subsequent recovery.

JSE missing out

Dalrymple pointed out that, over the past three years, investors holding 20% in cash on just the ten best trading days would have given up around ten percentage points of return.

“Over five years, the shortfall increases to about thirteen percentage points,” he said. 

“Best days tend to cluster around the worst, meaning reduced exposure during periods of stress often results in missing the recovery.”

The Bureau for Economic Research’s Tracey-Lee Solomon explained in the firm’s latest weekly newsletter that, despite the Middle East war, global equity markets continued to benefit from the ongoing artificial intelligence (AI)-driven rally.

“The S&P 500 reached another record high this week, while Asian markets also surged. Japan’s Nikkei, South Korea’s KOSPI, and Taiwan’s equity market all touched new highs, buoyed by optimism surrounding AI,” she said. 

“Unfortunately, South Africa’s JSE has not participated in the global rally given its limited exposure to large-cap technology stocks.”

While the S&P 500 continues to reach new highs week after week, the JSE All-Share Index has declined by over 5% since the start of the Iran war and has gained only 3% year to date.

The primary sectors on the JSE are resources, financials and industrials, with the local bourse having very limited exposure to large-cap technology stocks.

South African investors can, of course, access global markets and the S&P 500 to partake in the global AI boom. However, when it comes to retirement funds, there are limits.

In South Africa, Regulation 28 of the Pension Funds Act limits retirement funds’ offshore exposure to a maximum of 45% of total assets.

This Regulation was updated in 2022, bringing the offshore exposure limit up to 45% from 30% previously.

Therefore, while South African investors can access global markets, they must do so within these limits for their retirement funds, and those looking for more exposure must do so through other investment products and brokers.

The graphs below, courtesy of Allan Gray, show the shifts in the JSE ALSI’s sector weights from 2015 to 2025, and its sector concentration levels since 1960.