JSE Top 40 pain for investors

The JSE Top 40 has dropped to a loss year-to-date on the back of tight monetary policy, South Africa’s structural problems, and investors moving their money overseas.

The South African market had a strong start at the beginning of the year. At the end of January, it had already delivered a 9.37% return.

However, the rally was short-lived. Less than two months later, the JSE Top 40 index dipped 2% lower than where it started at the beginning of the year.

From the end of January to mid-March, the JSE Top 40 experienced an 11.4% drawdown. Since then, it has been a roller coaster ride of ups and downs.

In April, the index rallied again to a 7.8% year-to-date performance. Three months later, it had given back all its gains.

The JSE Top 40 is on a downturn again and has fallen to its lowest year-to-date point recently. On Tuesday afternoon, the index closed at a year-to-date performance of -2.2%.

A R1,000 investment in the index at the beginning of the year would, therefore, only be worth R978.02.

One of the main reasons is the increasing interest rates, which have dominated monetary policy over the last two years.

Interest rates have increased by 125 basis points since the beginning of the year and have significantly impacted the market.

Historically, the South African equity market has always experienced a decline during an interest rate hiking cycle.

The chart below shows the JSE Top 40’s performance in 2023.