JSE Top 40 versus S&P 500 in 2022 – the winner is clear

An analysis by Daily Investor showed that the JSE Top 40 outperformed the S&P 500 by a significant margin in 2022.

2022 was a challenging year for the global economy as inflation rates started rising in response to increased demand following the Covid pandemic and supply chain constraints.

On top of this, the war in Ukraine and lagging energy supplies sparked a significant increase in energy prices.

Central banks, including the South African reserve bank (SARB), reacted to rising inflation by increasing interest rates.

The SARB was an early mover. In November of 2021, it increased interest rates by 25 basis points when inflation was still within the SARB target range of 3% to 6%.

The US Federal Reserve reacted much slower. Its first interest rate hike was in March 2022, when inflation was already very high.

The rising interest rates impacted US markets far more than South Africa’s JSE because company valuations in the US, especially for tech stocks, were much higher.

The average P/E ratio for the S&P 500 was between 30 and 40 times earnings in 2021, whereas the JSE All share index traded at P/E ratios between 11 and 14 times earnings.

A rising interest rate environment typically benefits value investing, and mega-cap tech stocks with high valuations were severely punished.

JSE Top 40 versus S&P 500 in 2022

Daily Investor analysed the performance of a R100 investment in the S&P 500 and the JSE top 40 indexes in 2022.

We tracked the performance between 1 January 2022 and 31 December 2022 to see which market had a stronger performance during these periods.

The JSE Top 40 comfortably outperformed the S&P 500. The investment in the local bourse returned R109.64, whereas the S&P 500 only returned R85.71.