US equity markets have traditionally moved mostly in response to company earnings and forecasts, economic data, interest rate expectations, and, sometimes, geopolitical risk factors. But as we head deeper into the second term of the Donald Trump presidency, political uncertainty is increasingly setting the direction for the US stock market indices.
In the Trump 2.0 era, markets are now primarily led by tariff threats and reversals, Presidential frustration with the Federal Reserve, and courtroom rulings as Trump tests the limits of his executive power in unusual ways. The political headlines of the day reflect a general disconnect of the markets from business fundamentals.
This is particularly apparent in the wild rollercoaster ride the markets have been on since Trump announced sweeping tariffs against US trade partners on his 2 April “Liberation Day”. Markets have recovered very well this month as Trump paused or watered down many of these tariffs to negotiate with China, the European Union (EU), and other partners.
Equities extended their upwards climb once again this week following a federal trade panel’s ruling that struck down many of Trump’s tariffs, excluding import duties on automobiles, auto parts and steel and aluminium. However, that momentum wobbled when an appeals court temporarily reinstated the measures.
Trump also took aim at the Fed this week, summoning Chairman Jerome Powell to his office to voice his displeasure at the slow pace of interest rate cuts. As expected, Powell has rebuffed political pressure to cut rates, saying the Fed’s independence remains intact. But the optics of political interference leave investors uneasy.
By historical standards, the levels of policy uncertainty are high. The US Economic Policy Uncertainty Index, a gauge of policy-related economic uncertainty, shows the highest readings since the peak of the COVID-19 pandemic in 2020. The current levels of policy uncertainty surpass even the global financial crisis and 9/11.
We can, thus, brace for volatility for the foreseeable future as markets react sharply not just to jobs numbers or inflation, but also to trade deal whispers and legal interventions. Nonetheless, as the May bounce-back illustrates, uncertainty doesn’t necessarily translate into a one-way downwards spiral.
As at yesterday’s close, the S&P 500 was up more than 6.3% for the month and 1% year-to-date, this being just 3.4% off its all-time high reached on 19 February 2025. In addition to the tariff news, markets this week were powered by an expectations-beating earnings report from Nvidia. The AI giant jumped over 5% for the week and was briefly the world’s most valuable company with a $3.4 trillion market cap.
Although US stock market indices have surged of late, the US dollar, while not at historically weak levels, has fallen 8.2% versus a basket of developed market currencies this year. For those US investors measuring their dollar investments in, for example, pounds or euros, their wealth would have been negatively impacted by the decline in the dollar’s value.
We welcome the relief the rally has given our investors but remain mindful of the continued macro risks. US GDP contracted 0.2% in the first quarter, with trade deficits dragging on growth and consumer spending slowing. While Trump’s tariff climbdowns may allow for a second quarter rebound, the economy remains vulnerable.
More trade fights could reignite inflationary pressures, potentially delaying interest rate cuts. Furthermore, it may take some time for the impact of Trump’s tariffs and threats of further tariffs to reflect in economic data. Uncertainty about the tariffs and rules under which companies will operate in future months clouds the economic outlook.
In the midst of policy uncertainty, markets will remain volatile. Steep drops are just as likely as sudden surges in this kind of environment. For most investors, sticking to their long-term plan is a wiser course of action than responding to the day-to-day noise of Presidential social media posts and courtroom battles.
“Uncertainty is the only certainty there is and knowing how to live with insecurity is the only security.”
– John Allen Paulos, American mathematician
“The tariff muddle extends. You have to wonder if investors tire of the on, off nature of trade policy.”
– Shaun Osborne, Scotiabank’s chief currency strategist
Global News
- On Wednesday, the US Court of International Trade ruled that Trump exceeded his authority by imposing the “Liberation Day” tariffs under the International Emergency Economic Powers Act, stating that the taxes require congressional approval. The court’s decision invalidated these tariffs, which had targeted imports from countries including China, Canada, and Mexico. Last night, a federal appeals court temporarily blocked the ruling. Although the court did not rule on the merits of the tariffs, its decision allows Trump to maintain the levies for now and continue using them as leverage in trade negotiations. The case remains unresolved and is expected to reach the Supreme Court. While this legal battle unfolds, other tariffs imposed under different statutes, such as Sections 232 and 301, which include those on steel, aluminium, and automobiles, remain in effect.
- Importers and trading partners around the world were left in limbo by the court decision that blocked tariffs, although, on Wednesday, there was a brief burst of optimism: Stocks rose internationally as investors hoped the decision, handed down by the US Court of International Trade, might restrain Washington’s assault on world markets.
- Trump’s trade war has cost companies more than $34 billion in lost sales and higher costs, according to a Reuters analysis of corporate disclosures, a figure that is expected to rise as ongoing uncertainty over tariffs paralyses decision-making at some of the world’s largest companies. The $33 billion is a sum of estimates from 32 companies in the S&P 500, three companies from Europe’s STOXX 600, and 21 companies in Japan’s Nikkei 225. Economists say the cost to businesses will likely be multiple times what companies have so far disclosed.
- The EU and the US seem willing to work toward a trade deal over the next 6 weeks, the first significant improvement in their economic relations since Trump’s second term began in January. This abrupt reversal started towards the end of last week after Trump’s threat to put a 50% tariff on EU imports on 1 June, arguing the EU wasn’t coming to the table fast enough. On Monday, the EU indicated it was willing to accelerate negotiations.
- The impasse between China and the US continues after the Trump administration’s decision to stop exports of chip design software, jet technology and certain chemicals to China. This decision came shortly after the US sought to block Huawei Technologies from selling advanced AI chips globally, triggering a strong response from Beijing. The US Commerce Department has said it is “reviewing exports of strategic significance to China”. The latest escalation in the trade conflict comes just weeks after a temporary truce – one that failed to address the underlying issues fuelling the rivalry, particularly the critical matter of technological supremacy.
- Trump continued to push Fed Chairman Jerome Powell to lower interest rates at their first in-person meeting since the President’s inauguration in January, the White House said yesterday. Yet, Fed officials are worried that tariffs could aggravate inflation and create a difficult quandary with interest rate policy, minutes released on Wednesday from their 6 and 7 May meeting show. The summary of the Federal Open Market Committee reflected ongoing misgivings about the direction of fiscal and trade policy, with officials ultimately deciding the best course was to keep rates steady. The minutes also showed that officials may face difficult trade-offs if inflation proves to be more persistent and the outlooks for growth and employment weaken.
- Billionaire Elon Musk, once Trump’s “first buddy,” is distancing himself from the leader, making it clear he is disillusioned with Washington and the obstacles to his aims to fix the federal bureaucracy. Musk has also decried Trump’s giant tax Bill, which is now before the Senate, as undercutting his efforts to slash government spending. He said he was “disappointed to see the massive spending Bill, frankly, which increases the budget deficit, not just decreases it”. In a post on X, his social media site, on Wednesday night, he officially confirmed for the first time that his stint as a government employee was coming to an end and thanked Trump “for the opportunity to reduce wasteful spending”.
- The US economy contracted by 0.2% in the first quarter of 2025 on an annualised basis, marking its first quarterly decline in three years. This downturn was primarily driven by a 42.6% surge in imports, as businesses rushed to bring in goods ahead of Trump’s broad tariff implementations, which widened the trade deficit and subtracted nearly 5 percentage points from GDP growth. Consumer spending also slowed, increasing only 1.2%, the weakest in three years, while federal government spending fell by 4.6%. Despite a 24.4% increase in business investment, the overall economic momentum remained negative. Economists caution that ongoing trade policy uncertainties could continue to weigh on growth in the coming quarter.
- The International Labour Organization predicts, in a report released on Wednesday, that 53 million jobs will be created worldwide in 2025, 7 million fewer than previously thought, because of a shakier economic outlook caused by trade disruptions and geopolitical tensions. Another 84 million jobs are at risk. The agency based its analysis on the International Monetary Fund’s downgraded expectations for the global economy, which dropped to 2.8% in April from 3.2% previously.
- Nvidia posted record first quarter revenue for the 2026 financial year of $44.06 billion, a 69% increase from the previous year, largely driven by surging demand for AI chips. The company faced setbacks from US export restrictions, including a $4.5 billion charge for unsold H20 chips and $2.5 billion in blocked shipments to China. Despite forecasting an $8 billion revenue impact in the second quarter due to these restrictions, Nvidia remains confident, citing strong demand for its new Blackwell chips and continued global expansion, including major AI infrastructure projects abroad. The stock is up 6% for the week.
- Apple is under growing pressure from political, competitive, and market forces. Recognised as the world’s most valuable company in early May, it has slipped to third behind Microsoft and Nvidia, following Trump’s regular criticism of the company, a threat of 25% tariffs on iPhones made outside the US, as well as concerns around Apple’s slower progress in generative AI. At the same time, the company faces softer iPhone sales, particularly in China, amid competition from Huawei, along with regulatory challenges and rising tariff-related costs. While its stock is down 14.7% in 2025 and iPhone sales are expected to dip, Apple’s long-term fundamentals remain strong, though investors are growing more cautious.
- Shein Group could switch its planned listing to Hong Kong from London, the latest twist in the fast-fashion retailer’s turbulent pursuit of going public. Sources indicate that Shein has shifted focus because the approval process with Chinese regulators for its proposed London listing was dragging on, although Shein has not yet made a decision where to list. Shein’s about-face would be a blow to London’s waning IPO market as the city faces mounting competition from other financial centres, while Hong Kong’s bourse is heading for a banner year.
- As at Thursday’s close the S&P 500 was 1.9% up for the week.
Local News
- Yesterday, the South African Reserve Bank (SARB) cut its benchmark interest rate by 25bps to 7.25%, marking its lowest level in over two years. The decision to cut was unanimously supported by the Monetary Policy Committee and reflects a shift towards a more dovish stance amid subdued inflation and a challenging economic environment. Inflation has remained below the SARB’s 3% to 6% target range, with April’s rate at 2.8%. The central bank also revised its 2025 GDP growth forecast down to 1.2% from 1.7%, citing global trade uncertainties, particularly US tariffs, and domestic structural challenges. Additionally, the SARB is considering lowering its inflation target to 3%, with discussions on this adjustment advancing and awaiting approval from the Finance Minister.
- Of South Africa’s eight metros, only Cape Town was given a clean bill of health by the Auditor-General, with the others, including Johannesburg and Tshwane, being found to not have sufficient financial processes in place. Only 16% of South Africa’s municipalities can be trusted to spend public funds effectively, and they account for just 19% of the municipal expenditure budget, says Auditor-General Tsakani Maluleke. These findings were contained in her 220-page report on the 2023-24 local government audit outcomes, tabled to Parliament’s Cooperative Governance and Traditional Affairs committee on Wednesday.
- South Africa is facing a new electricity crisis as grid capacity in the Free State and North West is nearly full, adding to similar issues in the Eastern, Western, and Northern Cape. This limits new renewable energy projects in the most resource-rich areas until the grid is expanded. While some capacity remains in other provinces, relocating projects there could reduce efficiency and raise costs. A long-term grid expansion plan is underway, with private sector involvement, but progress will take time. Meanwhile, delays have already affected renewable energy bids, though new battery storage project awards are expected soon.
- Mineral Resources and Energy Minister Gwede Mantashe has confusingly said there are no BEE requirements for exploration in the draft Mineral Resources Development Bill, and such conditions would be removed if they were there. This contradicts the Minerals Council’s reading of the draft Bill, with the Council having said that the proposed amendments do not specifically remove requirements for mineral prospectors to be empowered. The DA on Wednesday said: “The new minerals Bill is a disaster in the making”.
- The B-BBEE ICT Sector Council has voiced strong concerns regarding recent empowerment policy proposals, following the gazetting of a new B-BBEE policy for the sector, which seems to have been developed to allow Elon Musk’s Starlink to operate in South Africa. While new spectrum allocations are welcomed, it argued against proposals that will allow an equity equivalent programme to replace requirements for black ownership. It said allowing international companies to contribute to socio-economic projects will reverse transformation gains. The EFF has also slammed the proposal.
- The tourism sector continued its recovery from the COVID-19 downturn, reinforcing its importance to the economy. According to a Statistics South Africa release on Tuesday, 2.98 million travellers passed through borders in April 2025, a 21.4% increase year-on-year. This growth is part of a broader upward trend seen in recent months. This week, the World Travel & Tourism Council said it expected South Africa’s travel and tourism sector to surpass 2019 levels in terms of jobs supported.
- On Wednesday, Anglo American Platinum (AMPLATS) began trading under the new name Valterra Platinum on the Johannesburg Stock Exchange (JSE), marking a significant step in its demerger from the Anglo American Group. This move is part of the Platinum company’s strategy to operate as a standalone entity, focusing on its core platinum group metals business. The rebranding and listing reflect the company’s commitment to enhancing shareholder value and operational efficiency in the competitive mining sector.
- Pick n Pay has reached its most significant online milestone yet as it continues to try to grab market share from rivals Shoprite and Woolworths. As part of its digital focus, it has launched a new app that pulls together its on-demand delivery service asap!, Smart Shopper loyalty programme, and value-added services into a single, next-generation platform. The listed retailer, which pushed its breakeven date for its Pick n Pay unit out a year to 2028, said on Monday that its headline loss a share improved from minus 172.3c to negative 61.54c in the six months to March.
- Dis-Chem announced on Friday that effective cost management, particularly reducing payroll costs by 1% through a new staffing framework, was the main driver of profit growth for the year ending February. It said in an announcement to shareholders that it now had “a consistent and optimal mix of staff,” hinting at job losses. The company opened 20 stores and closed 12, bringing its total to 285 retail pharmacy stores and 45 baby stores. Operating profits grew by 18.3%, surpassing the 8% reported revenue growth. Earnings per share increased 12.2%, and basic headline earnings per share rose 12.3%, despite acquiring a warehouse in Midrand.
- As at the time of writing, the rand was 0.3% weaker against the dollar, and the ALSI was 0.9% up for the week.
Sources: Dynasty, Bloomberg, CNN, IOL Business, Business Report, BusinessLIVE, NYT, Daily Maverick, BusinessTech, News24, Moneyweb, Reuters, CNBC etc.
