2025 is looking to be a year focused on policy, as Trump continues to implement hefty trade tariffs, and South Africa sees a postponement of the Budget for the first time in our Democracy.

An expected 25bps rate cut set a hawkish tone, although the usual positive seasonality didn’t materialize and the final days of the month saw a negative trend.

The US elections and Trump’s clean sweep was the main focus over the past month. Further rate cutting by both the Fed and SA’s MPC resulted in another 25bps decrease in interest rates.

US elections, Iran’s missile attack on Israel, the ongoing Russia/Ukraine war and earnings season being well underway have all made for an interesting month - resulting in markets moving sideways with some volatility in between.

The FOMC started the cycle with a 50bps point cut resulting in a positive reaction from the market as the chances of a soft landing increased, and South Africa also saw their first cut with a 25bps cut

Earning season winds down, and the JSE gains more traction as positive news flow around the GNU helps drive a more optimistic risk sentiment

Internationally, July was an interesting month with an assassination attempt on Trump, Biden dropping out the election race and escalating tension in the Middle East. SA’s improved economic backdrop has resulted in positive sentiment.

SA inc stocks jumped although there was some retracement as there is still uncertainty as to how effectively the political parties will work together. Big tech continued to be a driving force for markets, and while AI remains a clear tailwind for the technology sector there are some questions around which players will truly unlock value.

For the first time, South Africa is facing a coalition Government at National level as voters voiced their frustrations with the ANC, and it’s now up to party leaders to put their country first as negotiations for the way forward begin. In market news, the macro environment remains focused on the inflation trajectory and what that might do to rate cut expectations.

There has been a significant shift in market expectations in 2024 to date – while we started the year with optimism around the disinflation progress allowing significant rate cuts during the year, the odds of a June Fed rate cut dropped to 20% from the prior weeks 60% probability, and following this shift we saw interest rates increase.

Although Fed officials are sending mixed messages about rate cuts, the trend demonstrates that we are moving into a rate cutting cycle.

Offshore markets are off to a good start for 2024, driven by rate cut expectations and IT tailwinds. Douglas Investments’ portfolios have benefitted from this move, based on our technology bias and strong earnings from some of our preferred single stocks, however, expectations may be elevated resulting in high valuations.