🚨 Will the SARB Cuts Open a Rand Window?

Today's anticipated SARB interest rate cut has us keeping an eye on our portfolio, potentially boosting bank stocks and creating a window for offshore investments thanks to the rand's recent strength. Here's what you need to know: 3 opportunities, 2 reality checks, and 1 actionable step for smart money.

THREE MARKET OPPORTUNITIES 🎯

1. Can The Repo Rate Cut Create Momentum

The SARB is expected to cut the repo rate today, showing a stance to keep inflation below 3%. JSE financial sector stocks including Standard Bank, Capitec and FirstRand showed performance with positive earnings updates and improved loan growth prospects.
The opportunity: Attractive valuations combined with improving fundamentals make local banks a key play for both income and capital growth as the rate cutting cycle continues.

2. Rand Strength Opens Offshore Window

The rand strengthened to lows of R17.75/USD in July, supported by the potential SARB rate cut and a weaker US dollar amid global trade tensions. This rand strength reduces the cost of offshore assets for SA investors, creating a window to increase exposure affordably.
The opportunity: Offshore diversification becomes dramatically more affordable and prudent amid local economic uncertainties - every rand now buys significantly more international assets than just weeks ago.

3. Gold Miners Capitalise on Price Levels

Gold traded around R1900 per gram in late July, near recent highs, supported by geopolitical risks and aggressive central bank buying globally. SA gold miners like Harmony Gold and Gold Fields reported strong production and improved earnings outlooks as the rand-gold price combination continues supporting healthy margins.
The opportunity: Gold mining stocks offer inflation protection and portfolio diversification while generating rand-hedged revenues that benefit from currency volatility.

Note: This is not financial advice, merely observations. For personalised financial advice, you can book to speak to a financial advisor here (powered by a registered FSP: No. 51310).

TWO REALITY CHECKS ⚠️

#1: The "Safety" of Cash Is an Illusion

Holding large amounts of cash in a bank account feels safe, especially during uncertain times. However, financial advisors warn this is one of the most common and costly mistakes investors make. While cash is essential for emergencies, its value is consistently eroded by inflation over the long term. This problem is magnified in the current environment where the South African Reserve Bank is in a rate-cutting cycle, which will further reduce the after-tax yields on cash holdings, making it almost certain that your money won't outperform inflation.
The harsh reality: Holding excess cash isn't preserving your capital; it's a guaranteed way to lose purchasing power over time. If you want your money to grow, it needs to be invested and working for you.

#2: The Myth of Easy Double-Digit Returns

A persistent myth in retirement planning is the assumption of consistently high returns, such as inflation plus 5% or more. The reality is much more sobering. Over the past decade, many Regulation 28-compliant balanced funds have struggled to deliver even CPI+3%, with the median return sitting at just 7.46% per year. Furthermore, headline returns are not what lands in your pocket. High fees, including administration and advice fees which are not always reflected in published performance, can significantly reduce your actual returns.
The wake-up call: Chasing unrealistic returns while ignoring the impact of high fees is a critical retirement planning mistake. You must know your portfolio's true return after all costs to determine if you are on track to meet your goals.

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ONE ACTION TO TAKE 🚀

Rebalancing: Capture Banking Momentum + Offshore Diversification

With banks rallying and the rand creating an offshore buying opportunity, this is the kind of moment to rebalance your portfolio across three key themes driving current market conditions.

Here's how to get started:

• Banking Play: Increase allocation to JSE banks and financials (Nedbank, FirstRand, Standard Bank) to capture policy-driven upside and stable dividends

• Defensive Gold: Add or maintain exposure to gold miners (Harmony Gold, Gold Fields) for inflation protection and rand-hedged growth

• Offshore Window: Gradually increase offshore exposure to global AI and semiconductor ETFs, using rand strength to manage high valuations

• Currency Strategy: Stagger offshore purchases over 2-3 months to manage remaining rand volatility risk

The difference between investors who build wealth and those who don't? Taking action on the right information at the right time.

Take the Next Step For Investors: Don't know your risk profile? Discover if these opportunities match your goals: Find Your Finimal

For Advisors: Join our growing network of fee-only professionals helping South Africans achieve FIRE: Chat to Travys

Your money matters. Make it count.

See you next month,

The FinMeUp Team