R100 invested in the JSE Top 40 and S&P 500 in 2024 – the winner is clear

The S&P 500 has outperformed the JSE Top 40 year-to-date. However, the renewed optimism in South Africa can drive the local index.

South African markets have suffered greatly over the last decade, with state capture, the Zuma years, and poor economic growth hurting the country.

Daily load-shedding, Transnet’s collapse, and water problems added to this, forcing businesses into survival mode.

However, over the last few months, South Africa has had numerous positive developments that have bolstered the markets.

The country formed a government of national unity following the 2024 national elections, avoiding a left-leaning ANC/EFF/MK coalition.

South Africa has also experienced over four months without load-shedding, which reduced business costs and brought down inflation.

Another positive development is that Transnet is getting fixed through private participation, which will improve exports.

However, the country still faces headwinds. Political uncertainty and the difficult business operating environment will take years to fix.

Despite these challenges, many investment experts view South Africa as a more attractive destination than previously.

Since the election, foreign investors have bought R12.2 billion of local bonds, bringing the year-to-date inflows to R22.2 billion. This exceeds the R16.5 billion from last year.

South African stocks have also received increased interest from investors, with foreigners pumping billions into them at the end of June.

Money flowing into South African assets increases demand for the local currency, strengthening relative to its peers.

This significant shift in sentiment cuts against the trend seen in South African financial markets over the past decade.

It raises the question of whether it was best to invest in the local market or choose the United States.

To answer this question, Daily Investor compared the performance of the JSE Top 40 and the S&P 500 in 2024 in rand.

The JSE Top 40 refers to the 40 biggest companies on the JSE by market capitalisation. It includes big companies like BHP, Richemont, Naspers, FirstRand, and MTN.

The S&P 500, or Standard & Poor’s 500 Index, is a market-capitalization-weighted index of 500 leading publicly traded companies in the United States.

The S&P 500 is heavily skewed towards the technology giants Microsoft, Apple, Nvidia, Google, and Amazon.

The analysis showed that the JSE Top 40 index returned 6.1% in 2024, while the S&P 500 index returned 14.4%.

This means that despite the strong performance of local stocks since the election, the S&P 500 was still the best option this year.

The chart below shows the performance of the JSE Top 40 and S&P 500 year-to-date.