Buy America or sell America? Investor sentiment showed signs of splitting between the two impulses this week, with US equities markets rallying strongly at the same time as global bond and currency traders are raising questions about monetary and fiscal stewardship under US President Donald Trump’s administration.
The renewed scepticism about economic policy revives the “sell America” trade of April 2025, when Trump’s “Liberation Day” tariff announcement triggered a selloff in the US dollar, equities and US government bonds. This time, investors are keeping faith in corporate America but betting against US economic policy.
Recent decisions out of Washington have reinforced concerns that the administration is prioritising short-term political objectives over long-term fiscal and monetary credibility. These fears are compounded by Trump’s tariff policies, Fed Chairman Kevin Warsh’s limited signalling on the future rate trajectory, and the ongoing conflict in the Middle East.
Analysts believe that unease about the Fed Chairman’s stance was one of the factors that prompted bond traders to sell off long-term US Treasury bonds after the Federal Open Market Committee meeting in July, with the 30-year yield spiking to more than 5.2% this week, the highest since 2007. The lack of clarity about the Fed’s inflation-fighting resolve made traders anxious after a large bloc of Fed officials pushed for an immediate rate hike.
This week, uncertainty was compounded by Treasury Secretary Scott Bessent’s coordinated intervention to support the yen. While structured to avoid disrupting Treasury markets, this was the first such move in nearly three decades. The intervention in the yen was seen as a sign that the administration favours a weaker dollar. These factors contributed to the US dollar trading near seven-week lows on Wednesday, 5 August 2026.
But the dichotomy in the US financial markets was evident again this week as US equities markets were untroubled by the economic policy news. An AI-fuelled rally powered the Nasdaq 100 to gains of nearly 4%, the S&P 500 to a rise of nearly 3%, and the Dow Jones Industrial Average to an increase of around 2.7% for the week at the time of writing. The S&P 500 and the Dow Jones Industrial Average touched record highs on Tuesday. Early this week, the “Magnificent Seven” collectively added well over a trillion dollars in market value over just a few sessions.
Taken together, the mixed performance of US assets this week can be seen as a Trump administration premium. On the one hand, holders of long-term bonds are seeking a premium for policy uncertainty and a weaker-dollar outlook. On the other hand, Trump’s administration’s tax cuts, deregulatory instincts, and enthusiasm for AI and Big Tech are helping to drive US equities markets higher.
“Bessent and Warsh are a double whammy to global markets that investors can’t ignore. They have to start pricing risks of their policies into the dollar, into the Treasuries curve, and in fact, they’re doing it right now. It’s the Trump administration premium.”
– Rajeev De Mello, global macro portfolio manager at Gama Asset Management
Global News
- Global bond and currency investors reassessed the “Sell America” trade on Thursday as recent US policy decisions raised fresh doubts about Washington’s economic direction and the resilience of US assets. The 30-year Treasury yield has climbed above 5% to its highest level since 2007, while the dollar has weakened against almost every G10 currency over the past month despite higher yields. Investors said uncertainty over the Fed’s inflation strategy, fiscal policy and US support for Japan’s yen intervention is weighing on confidence in the dollar and long-dated Treasuries.
- The S&P 500 notched its 25th record high of the year on Tuesday, capping a $3.7 trillion four-day rally driven by strong corporate earnings and easing oil prices. Second-quarter earnings are on track to grow 29%, with analysts continuing to raise 12-month earnings forecasts, reinforcing confidence that the market’s advance is being supported by robust profit growth. The index has now recorded 25 all-time highs this year, after 39 in 2025 and 57 in 2024.
- Gold is on track for its strongest weekly gain since January, rising more than 5% as dip-buying, strong Chinese investor demand and a technical rebound after holding above the $4,000-an-ounce level outweighed renewed tensions in the Middle East. Despite flare-ups around the Strait of Hormuz, investors continued to accumulate bullion, although expectations of a possible US interest-rate hike in September remain a near-term headwind for the non-yielding metal.
- US manufacturing activity expanded in July at its fastest pace in more than four years, as strong demand, rising production and the first increase in factory hiring since September 2023 signalled growing momentum in the sector. The Institute for Supply Management’s manufacturing gauge rose to 55.6, its highest level since May 2022, according to data released on Monday. However, manufacturers continued to face elevated input costs and longer supplier lead times, highlighting persistent inflationary pressures.
- The US government refunded about $100 billion in tariffs invalidated by the Supreme Court, according to a court filing on Tuesday, highlighting the financial cost of the administration’s earlier global tariff programme. The repayments were made to corporate importers that paid the duties before the levies were struck down in February, although critics argue many of the higher costs had already been passed on to consumers. The refunds underscore the legal uncertainty surrounding the administration’s trade policy as its latest tariffs face fresh court challenges.
- The US-Iran conflict entered a more uncertain phase this week as diplomatic efforts to reopen the Strait of Hormuz continued alongside renewed military and political tensions, reinforcing expectations that the conflict could persist. While Trump expressed optimism that the war could end soon, Iran continued to link any shipping agreement to broader security and sanctions issues, leaving global energy markets on edge. The prolonged standoff is sustaining geopolitical uncertainty and keeping investors focused on the risks to energy supplies, inflation and global growth.
- Oil prices remained volatile this week as uncertainty over the Strait of Hormuz kept investors focused on supply risks despite continued efforts to keep crude flowing to global markets. Brent crude traded around $79 a barrel on Friday as concerns over the conflict offset evidence that supply has remained more resilient than expected. The UAE’s state-owned oil company, ADNOC, has sold more than 130 million barrels since June, helping prevent the sharper oil shortages and price spikes many had feared, although energy markets remain highly sensitive to further escalation in the US-Iran conflict.
- The yen’s rally stalled on Tuesday after its strongest four-day gain in two years, despite US Treasury Secretary Scott Bessent reaffirming support for Japan following a historic joint currency intervention. Traders remain focused on the ¥155-per-dollar level as the key test of whether the rebound can become a sustained trend, while a Reuters poll conducted between 31 July and Thursday found almost 95% of foreign exchange strategists believe intervention alone will not reverse the yen’s weakness without faster Bank of Japan interest-rate hikes.
- China’s AI-driven export boom continued in July despite severe weather disruptions, with strong global demand for semiconductors, computers and electric vehicles helping exports rise 23.9% and imports 27.5%, leaving a trade surplus of $112.5 billion. The data released on Friday suggests high-tech manufacturing remains China’s main growth engine, although surging chip and commodity prices inflated trade values and continued to mask weak domestic demand.
- China’s rapid AI advances are narrowing the gap with Silicon Valley, with a wave of new models demonstrating the country’s growing ability to produce frontier AI at a fraction of the cost of US rivals. Recent launches from Alibaba, Moonshot and DeepSeek have matched or challenged leading US models on both performance and pricing, intensifying competition and raising questions over the effectiveness of US chip restrictions. The breakthroughs are increasing pressure on the pricing power of leading American AI companies.
- Samsung and SK Hynix are testing chipmaking equipment from Chinese supplier AMEC as they prepare for the possibility of tighter US export controls on advanced semiconductor technology. While the companies continue to rely on Western equipment, they are concerned future restrictions could extend beyond new sales to servicing and maintenance of existing tools, prompting them to evaluate Chinese alternatives for their factories in China. The move highlights how geopolitical tensions are reshaping global semiconductor supply chains.
- Alphabet raised $25 billion through one of the year’s largest bond sales on Thursday, with investor demand reaching about $115 billion despite recent concerns over the cost of its AI expansion. The strong investor demand suggests investors remain key in the company’s long-term AI strategy, even after it raised its 2026 spending forecast to as much as $205 billion. Alphabet also said it plans to issue US dollar bonds twice a year to help fund future AI investment.
- Microsoft disclosed that OpenAI contributed $24.1 billion in AI revenue during the year ended June, accounting for about 70% of the software giant’s AI business. The filing issued last week highlights Microsoft’s continued reliance on its key partner despite efforts to diversify its AI strategy by backing Anthropic and developing its own models. It also provides investors with the clearest indication yet that Microsoft’s AI growth remains closely tied to OpenAI.
- Investors are rotating into US healthcare stocks as enthusiasm for AI-driven technology shares moderates, with the S&P 500 healthcare index rising 11.2% over the past three months to a record high, outperforming the broader market. Healthcare funds attracted $2.44 billion in July after three months of net outflows, supported by expectations of double-digit earnings growth through 2027 and a rebound in merger activity, with healthcare deal values reaching nearly $284 billion this year.
- Eli Lilly raised its full-year revenue forecast to $85 billion-$87 billion on Wednesday after strong demand for its GLP-1 medicines drove quarterly results comfortably ahead of expectations. Mounjaro sales surged 91% to $9.94 billion, while Zepbound generated $4.93 billion, reinforcing Lilly’s lead over Novo Nordisk. The company also reported encouraging early demand for its newly launched obesity pill Founday, which generated $98 million in sales and is under review in more than 40 markets.
- As at Thursday’s close the S&P 500 was 2.94% up for the week.
Local News
- Reserve Bank Governor Lesetja Kganyago said late on Tuesday that South Africa’s weak economic growth reflects the institutional destruction caused by state capture rather than macroeconomic policy, arguing that failures across government, state-owned entities and municipalities have left the private sector in survival mode and stalled investment. Despite prudent fiscal and monetary policies that have stabilised public debt and earned positive rating actions, the economy grew just 1.1% in 2025 and 0.5% in the first quarter of 2026.
- National Treasury noted on Tuesday that municipal mismanagement is threatening South Africa’s hard-won fiscal gains, with 162 of the country’s 257 municipalities in financial distress and widespread non-payment to Eskom, water boards and the South African Revenue Service undermining essential service providers. Treasury director-general Duncan Pieterse said the warning comes despite government stabilising public finances, winning positive ratings actions from Moody’s, S&P and Fitch, and remaining on track to reduce debt to 76.5% of GDP by 2028/29. He said restoring fiscal sustainability provides the foundation for stronger growth but unlocking investment and fixing local government remain critical.
- South Africa’s private sector expanded for a second consecutive month in July as easing fuel prices helped reduce input cost pressures and supported business activity, according to the S&P Global PMI released on Wednesday. However, the recovery remained fragile, with weaker demand weighing on growth and employment increasing at its slowest pace in six months, highlighting the economy’s continued structural challenges.
- Bank of America said on Wednesday that South Africa is well positioned for a new wave of mergers and acquisitions, with global investors attracted to well-managed companies that stand to benefit from an improving macroeconomic environment. Announced M&A deals in sub-Saharan Africa reached $50 billion in the first half of 2026, more than four times the level a year earlier. The bank expects Africa’s next generation of growth companies to be technology-enabled, but said disciplined execution and well-structured capital will be as important as innovation in attracting investment.
- South Africa’s pharmaceutical industry told Parliament on Thursday that it is in crisis, arguing that price-driven state procurement is eroding local manufacturing as the share of HIV medicine tenders awarded to domestic producers has fallen sharply since 2008. Industry body Pharmisa said the sector has lost thousands of jobs over the past 18 months, local production of oral contraceptives has ceased, and South Africa no longer has the capacity to formulate penicillin, prompting calls for preferential procurement, longer-term contracts and tax incentives to rebuild domestic manufacturing.
- Pick n Pay said on Thursday its turnaround is gaining traction, with turnover rising 2.7% in the first five months of the financial year as online sales jumped 37.5% and clothing sales recovered from a weak second half last year. Boxer continued to gain market share and expand its store footprint despite challenging trading conditions. However, the retailer said significant work remains, including completing its retrenchment consultation process, to achieve its target of returning the Pick n Pay business to break-even profitability within the planned timeframe.
- Glencore reported an 86% increase in first-half adjusted earnings before interest, tax, depreciation, and amortisation to $10.1 billion on Wednesday after energy trading profits surged 66-fold to $2.66 billion, benefiting from the market volatility triggered by the Iran conflict. The miner announced a special dividend and share buyback, while CEO Gary Nagle said a planned secondary listing in Australia would not come at the expense of Glencore’s 13-year JSE listing, describing South Africa as “a trailblazer” for the group.
- As at the time of writing, the rand was 1.85% stronger against the dollar, and the ALSI was 5.1% up for the week.
Sources: Dynasty, Daily Maverick, Business Day, Bloomberg, Reuters, TechCentral, IOL, etc.
