The first quarter of 2026 tested the nerves of even the most seasoned investors. Between shifting tariff policies from Washington, a series of surprise rate decisions from the South African Reserve Bank, and the ongoing recalibration of global supply chains, the JSE All Share Index experienced its widest intra-quarter trading range since 2020.
For clients of Harbour Wealth, these gyrations are not cause for panic — but they are a prompt to revisit the principles that underpin a resilient investment strategy. In this article, we break down the key drivers behind recent volatility and outline our approach to keeping portfolios on course.
What's driving the turbulence?
Three major forces have converged to create the current environment. First, the US Federal Reserve has signalled a more hawkish stance than markets had priced in at the start of the year. Sticky inflation data — particularly in services — has pushed expectations for the first rate cut further into the second half of 2026. This has strengthened the dollar, putting pressure on emerging market currencies including the rand.
Second, China's economic recovery has been uneven. While industrial output has stabilised, consumer spending remains subdued, and the property sector continues to weigh on sentiment. For South Africa, this matters enormously: China is our largest trading partner, and commodity exports — particularly iron ore and platinum group metals — are directly linked to Chinese demand.
Third, domestic factors have played a role. Load-shedding, while significantly reduced from 2023 levels, has not been fully eliminated. The fiscal consolidation path outlined in the February budget has been met with cautious optimism, but execution risk remains a concern for foreign investors assessing South Africa's sovereign credit trajectory.
Volatility is not the same as risk. Volatility is the price of admission for long-term returns. Risk is the permanent loss of capital — and that is what a well-constructed portfolio is designed to prevent.
How we're positioning portfolios
At Harbour Wealth, our investment philosophy centres on diversification across asset classes, geographies, and time horizons. In the current environment, we have made several tactical adjustments to our model portfolios:
Increased allocation to global equities. With the rand under pressure and SA-specific risks elevated, we have tilted portfolios slightly towards offshore exposure. This serves a dual purpose: it provides currency diversification and gives clients access to sectors — such as AI infrastructure, healthcare innovation, and advanced manufacturing — that are underrepresented on the JSE.
Maintained exposure to SA bonds. South African government bonds continue to offer some of the most attractive real yields in the world. At current levels, the risk-reward profile is compelling for investors with a medium-to-long-term horizon, despite short-term volatility.
Selective structured products. For clients seeking defined outcomes, we have introduced a number of structured notes linked to the Top 40 Index with capital protection features. These instruments allow participation in equity upside while limiting downside exposure — a particularly relevant proposition in the current market.
The importance of staying invested
History has consistently shown that the biggest risk in volatile markets is not being invested when the recovery comes. The JSE's best trading days frequently occur within days of its worst — meaning that investors who move to cash to "wait it out" often miss the very rallies that restore portfolio values.
Consider this: an investor who stayed fully invested in the FTSE/JSE All Share Index over the past 20 years would have earned an annualised return of approximately 12.5%. An investor who missed just the 10 best trading days over that period would have seen their annualised return drop to below 8%. Missing the 20 best days reduces it further to around 5% — barely keeping pace with inflation.
The message is clear: time in the market, not timing the market, is the most reliable driver of wealth creation.
What you can do now
If market volatility is causing you concern, we recommend three practical steps:
1. Review your financial plan. A well-constructed financial plan anticipates volatility. If your plan was built with realistic return assumptions and appropriate risk tolerance, short-term market movements should not require changes to your long-term strategy.
2. Rebalance where appropriate. Market moves can cause your asset allocation to drift from its target. Periodic rebalancing — selling what has performed well and buying what has underperformed — is a disciplined way to "buy low and sell high" without trying to time the market.
3. Talk to your advisor. If you're uncertain about your portfolio's positioning, reach out. Our team is here to provide context, reassurance, and — where needed — actionable recommendations tailored to your specific circumstances.
For more on how structured products can provide downside protection in volatile markets, visit our Structured Products section.