PDSNET Market Snapshot

Every major event that happens in the world inevitably offers some kind of investment opportunity for the private investor. The challenge is to work out how best to capitalise on it. So, it was with the war in Iran.

At the time that the war began with the Israeli and American bombing raids on 28th February 2026, we had already been watching the progress of Sasol for some time. The situation in Iran was tense with riots reported and North Sea Brent had climbed back up to $70 per barrel, but we had no idea that the Americans and Israelis were about to launch a bombing attack.

Sasol was always a blue-chip share and has historically occupied a dominant position in South Africa's synthetic fuels industry. It had, however been through some difficult times and the share price had fallen from a high of R430 per share to as low as R55 in April 2025. It then went through an extended period of sideways consolidation. We finally decided to add it to the Winning Shares List (WSL) on 18th February 2026 at a price of R128.36. Technically the share broke above resistance at R126 indicating that something was afoot. Consider the chart:

The chart shows Sasol’s long downward trend that began in the middle of 2022, mainly because of the falling price of various grades of oil. North Sea Brent oil fell from a high of $125 per barrel on 8th March 2022 to its cycle low just below $60 per barrel in mid-December 2025. Since Sasol derives more than half of its revenues and profits from the fuel industry, it is directly linked to the price of oil.

Sasol had been recovering but had encountered significant resistance at R126 per share. When it broke decisively above that level, that gave us the signal we needed. Immediately prior to the start of the war the oil price had been climbing, and in January 2026 there were riots in Iran which Trump and Netanyahu used as a pretext to begin the bombing. The price of Brent rose above $70 per barrel on 18th February, before the bombing started, and that triggered a rise in Sasol’s share price. We decided then that Sasol was probably under-valued and due for an upside move.

Sasol’s latest results for the year to 30th June 2026 show the benefits of the rising price of oil. Turnover was up 9% and earnings before interest taxation depreciation and amortisation (EBITDA) was up 17% while the company reduced its debt by 11%.

We do not normally advise investors to buy commodity shares like Sasol because they are riskier, but sometimes they can offer very good capital gains. In the case of Sasol the share appreciated rapidly after we added it to the WSL and then there was a correction as the oil price temporarily fell back in June and July this year. We held on because we thought there might be further upside potential.

The best investment policy is to try to hold onto your shares for at least three years, unless you are moving into a loss position (i.e. you had to execute an early stop-loss sale). This is because if you hold them for less than 3 years the Receiver may seek to declare you to be a share dealer – and then any gain you make will be added to your taxable income and you will be taxed on it at your marginal rate. If you hold for longer than 3 years, then your appreciation is treated as a capital gain for tax purposes and taxed at 18%.

As it turns out holding on to Sasol was the right decision and the share has now appreciated by 134% in about 8 months since we added it to the WSL – which is just shy of 200% per annum.

There are generally two types of risk in the share market – the risk that a specific share which you have bought falls known as unsystematic risk, and then the risk that the market as a whole falls and drags all your shares down with it - known as systematic risk. The systematic risk that the market is in or about to enter a bear trend is obviously a vital consideration for the private investor. During a bear trend about 80% (or more) of shares will fall while only 20% will rise. This means that from a purely statistical point of view it is better for private investors to stay out of the market during bear trends.

It is also very important to be able to distinguish between a correction (which is often a buying opportunity) and a bear trend. The safest approach is always to always buy shares which are rising, in sectors which are rising in a market which is rising. At the same time keeping a strict stop-loss strategy is vital to protect the bulk of your capital. As a private investor you should have an absolute rule that you never lose more than 15% on any share market investment – ever – and that should include your dealing costs. This can only be achieved if you buy free-dealing shares and always adhere to a strict stop-loss strategy.

Today, Monday 19th October 2026 is the exact anniversary of the greatest single day crash in stock market history. Thirty nine years ago, on Monday 19th October 1987, Wall Street collapsed. The S&P500 index fell more than 20% in the day. Other famous bear trends have also begun in October month, including the infamous 1929 crash, the bear trend of the year 2000, the 2008 sub-prime crisis, and the bear trend of 2022 associated with the Ukraine War. So, October month has a bad reputation with investors, and they generally heave a sigh of relief when it is over.

Ominously, Wall Street has been falling over the last week as the Iran war flared up again, pushing the price of North Sea Brent up to nearly $110 per barrel. Consider the chart:

In our analysis, we have drawn your attention to the fact that the S&P500 index has been moving through two sideways markets or flags as the countervailing forces of the rising oil price and the profitability of the artificial intelligence (AI) revolution play out.

The climb in the fuel price is causing a re-evaluation of inflationary risks throughout the world, but especially in America, where the price of petrol has remained stubbornly above $4 per gallon and diesel has hovered above $6 per gallon. With the mid-term elections just weeks away, Republicans and especially Trump are facing a barrage of criticism for their handling of the economy. The Iranians on the other hand are doing everything in their power to keep the oil price at high levels to put the maximum pressure on Trump.

What is notable is that the high oil price appears to be having less and less impact on Wall Street as time goes by. When Trump and Netanyahu began their war with Iran the S&P fell back sharply to 6611 on the 6th of April 2026, and the price of Brent oil went above $110 per barrel. Today Brent is again hovering close to those levels and the S&P has recently managed to reach a new record high at 7818. The world has been facing increased levels of inflation, rising interest rates, and record bond yields - but despite that, AI and corporate profits continue to take the market higher.  

In our opinion, as soon as October month is safely behind us and especially if the mid-term elections have the effect of reducing Trump to a lame dog president, we can look forward to a Christmas rally in the S&P500 during the festive season and into next year. As usual, we strongly advise you to be vigilant and to maintain your stops.

We live in an age where advances in technology are driving the gains in productivity and profits, and then being discounted directly into share prices. Artificial intelligence (AI) is already well established and being used by most companies to improve productivity. This can be seen in the results coming out of the companies in the S&P500 index. The impact of AI has only just begun to be discounted and now the next major technological breakthrough, quantum computing, is hovering in the background.

Quantum computing is essentially a jump forward in hardware which allows computers to analyse multiple different solutions simultaneously. Instead of using bits which are either 1 or 0, a quantum computer uses qubits which can exist in multiple states simultaneously - together with quantum entanglement. The technology uses the laws of physics at the atomic and subatomic level to solve complex problems much faster than regular computers, even supercomputers. Microsoft, Google, Amazon, Oracle, and even Meta and Tesla, are rushing to install quantum computing into their infrastructure. In a word, quantum computing will increase the power of AI substantially making it even faster and more powerful than it already is.

With that background, the earnings of S&P companies for the third quarter are beginning to trickle in, with 19 companies having reported so far. Total 3rd quarter earnings for those companies that have reported results already are up +150.9% from the same period last year on the back of revenues which are +27% higher. 79% of those companies are beating EPS estimates and 73.7% are beating revenue estimates.

The average estimate for all S&P500 companies is that earnings will be up by 24,3% in the 3rd quarter when compared with a year ago – and this will be the 8th straight quarter where estimates have been in positive double digits. 15 out of 16 sectors are expected to make significant gains – led by the technology and energy sectors.

As things stand now, the progress of the S&P500 index is being significantly held back by developments in Trump’s Middle East war and the price of oil. Iran would like to hold the price of North Sea Brent above $100 per barrel, at least until after the mid-term elections on 3rd November 2026 – which of course is very bad news for the struggling Republican party and Trump.

Looking at the chart, the S&P500 index has been moving through a series of protracted sideways markets for the past four months. During that time, technology and the prospects of that technology have not stood still. They have been advancing at a rapid pace.

Our belief is that as soon as the situation in the Middle East is resolved and the oil price comes back to where it was before the war began, the S&P will suddenly begin discounting the impact of the accumulated technical advances and move sharply higher. It will be like removing the lid from a pressure cooker. Consider the chart:

So, what we are saying is that considerable bullish potential has been built up by this war and its impact on oil prices. This can be seen from the fact that even with Brent at over $100 a barrel now, the S&P is still making new record highs, based on the exceptional estimates of 3rd quarter earnings and beyond.

There are, of course, those who believe that Brent is about to go much higher – like to $125 per barrel - given the escalation in Yemen with the Houthis and the attacks on the Saudi pipeline. But in our view the underlying direction of the oil price must be downwards as the world moves away from fossil fuels and towards renewables, especially solar.

To be safe, ensure that you have a strict stop-loss level for all the shares in your portfolio. That is the ultimate protection against unexpected downtrends and bear markets. Your absolute rule should be to never lose more than 15% on any share market investment ever – including your dealing costs. Sometimes it is difficult to achieve this, but provided you always choose shares which are free-dealing, it simply becomes a matter of self-discipline. And then if you are able to make several hundred percent on your winners, mathematically, you must be successful over time.