US equities have experienced another week of helter-skelter trading, repeating the pattern of recoveries and sell-offs we have seen several times this year.
The S&P 500 fell 2.7% and the Nasdaq Composite plunged 3.6% last Friday in one of the worst days of trading since US President Donald Trump announced his “Liberation Day” tariffs back in April. The sharp drop was largely a response to Trump’s threat to impose a 100% tariff on Chinese imports in response to Beijing’s new export controls on rare earth minerals.
Yet, markets snapped back on Monday as the Trump administration struck a conciliatory tone and indicated that the deadline for the new tariffs could be extended beyond 1 November to allow for negotiations.
Markets were also propped up this week by dovish comments from Federal Reserve Chairman Jerome Powell. He left the door open for further interest rate cuts and indicated that the Fed is prioritising labour market fragility over inflation concerns.
In addition, solid third-quarter results from major US banks supported the rebound and set a positive narrative for the earnings season. JPMorgan Chase, Citigroup, Goldman Sachs, and Wells Fargo all surpassed analyst estimates for earnings per share (EPS) and revenue. Investors saw these positive results as an indication of continued consumer and corporate strength. Markets continue to be blasé about the ongoing US government shutdown.
Throughout 2025, US equities have shown remarkable buoyancy in the wake of bad news and volatility. After plunging in April during the first wave of tariff announcements, markets clawed back losses and moved strongly into the black as investors bet on interest rate cuts and Artificial Intelligence (AI) – driven growth. The S&P 500 has gained more than 13% year-to-date, even after last week’s decline.
This pattern is consistent with the US market’s long track record of absorbing even the most dramatic shocks. During the Global Financial Crisis of 2008/09, equities lost half their value before staging a decade-long rally. In 2020, markets rebounded from the pandemic-induced collapse within months, driven by unprecedented monetary and fiscal support.
Looking ahead to the next few months, US markets may remain buoyant, even as the voices warning that a correction is overdue grow louder. Analysts mostly expect S&P 500 third-quarter earnings to reflect healthy growth, led by financials, technology, and industrials. The performance of the Magnificent Seven big technology stocks will be closely watched, given their dominant influence on index performance for the year-to-date.
Meanwhile, gold has continued its record-breaking rally, briefly surpassing $4,200 an ounce this week. The flight to gold represents a structural shift rather than short-term market jitters. Central banks throughout the world appear to be boosting gold reserves due to the weakening of the dollar and concerns about the weaponisation of the US currency against America’s geopolitical policies.
Overall, however, the US corporate sector reflects structural strength, and the consumer is holding up well in the face of sustained inflation. Balance sheets remain relatively healthy, cash reserves are high, and companies have adapted to tariffs. Continued expansion of AI-related investment and lower financing costs are helping to offset other macroeconomic pressures. Paul Donovan, Chief Economist at UBS, writes that, although “the impact of AI investment is good for growth long-term, the impact of AI investment on near-term growth is more mixed. Investment is one of the key components of GDP, but regional electricity prices can be pushed significantly higher by data centre demand, thereby leaving consumers with less money to spend on other goods and services, while energy-intensive businesses will also face higher costs.”
The ability of equities to rebound so quickly from shocks reinforces the perception that the US market is still the world’s primary engine of innovation and wealth creation. But that does not mean there are no risks ahead. A renewed escalation in the trade war, weaker-than-expected corporate earnings, or disappointment with rate cuts could all trigger further volatility.
“The English critic would do well to acquaint himself with the inherent probity and strength of the American speculative machine. It is not built to prevent crises, but to survive them.”
– Winston Churchill, statesman and former Prime Minister of the UK
Global News
- Last Friday, US President Donald Trump threatened to impose a 100% tariff on Chinese goods from November, responding to Beijing’s restrictions on rare earth exports, a move which led to US stocks closing sharply lower. Although he then signalled willingness to strike a trade deal with the Chinese, US Vice President JD Vance said on Sunday the outcome “depends on how the Chinese respond”. Hours later, China’s Foreign Ministry warned it would retaliate if Washington’s trade offensive continued. China has already sanctioned the US units of South Korea’s Hanwha Ocean, contributing to a brief global equity sell-off.
- The nearly three-week-old US government shutdown shows no signs of ending, with 71% of Polymarket voters predicting it will last 30 days or more. In just four days, Trump redirected billions in federal funds and threatened to cancel “Democrat programmes” without congressional approval. A Federal court has paused further layoffs amid fears that job losses could rise to 10,000, up from the current 4,000. The shutdown could also create a food stamp funding shortfall for about 42 million Americans and delay IPO approvals, despite the SEC allowing more flexibility on listing prices. According to the Treasury, the economic cost could reach $15 billion per week in lost output.
- In remarks at a business economics conference on Tuesday, Powell said the US economy may be on firmer footing than expected, but the job market remains weak, with both hiring and firing at unusually low levels. He acknowledged a growing divide within the Fed between those focused on taming still-elevated inflation and those increasingly concerned about a deteriorating labour market. With key data releases delayed by the ongoing government shutdown, Powell emphasised the Fed will take a cautious, meeting-by-meeting approach to future rate cuts, navigating mounting tensions between growth, jobs and price stability.
- The dollar climbed modestly on Monday as traders largely brushed off Trump’s renewed threat of imposing steep tariffs on China, instead focusing on the potential for a trade deal. The Bloomberg Dollar Spot Index rose about 0.2%, while the yen-led G10 losses against the dollar, and the euro slid below $1.16. The rebound suggests market participants are betting on diplomacy over escalation, even as tariff rhetoric lingers in the background.
- IMF MD Kristalina Georgieva said on Wednesday the global economy has weathered recent trade disruptions but warned growth could falter without prudent policies. Speaking ahead of IMF and World Bank meetings in Washington, she said recession forecasts haven’t materialised, though growth will slow slightly this year and next. With China “decelerating steadily,” medium-term growth is about 3%, down from 3.7% pre-COVID. IMF chief economist Pierre-Olivier Gourinchas on Tuesday blogged that it is “premature and incorrect” to say tariffs have not affected growth.
- China’s Communist Party will meet between 20 and 23 October to set a five-year plan likely to boost household consumption and address long-standing supply-demand imbalances threatening growth. Rising US-China tensions, highlighted by Trump’s renewed triple-digit tariff threats last week, complicate Beijing’s policymaking. Past growth focused on industrial expansion at the expense of consumption, fuelling deflationary pressures and unsustainable debt.
- Britain’s economy grew 0.1% in August from July, according to data released yesterday, offering limited relief to Chancellor of the Exchequer Rachel Reeves ahead of her November budget. The Office for National Statistics revised July’s GDP to a 0.1% decline from a previous flat reading. The IMF said this week the UK is set to post the G7’s second-fastest growth in 2025 at 1.3%, though that pace still implies tax hikes ahead.
- Gold extended its record rally this week, climbing to $4,322.34 per ounce driven by escalating US–China trade tensions, uncertainty from the US government shutdown, and growing expectations of Fed rate cuts. Analysts credit the surge, up about 63% year-to-date, to geopolitical risk, central bank demand, a weakening dollar, and ETF inflows. The broader precious-metals complex remains buoyed by safe-haven demand.
- US stocks ended Wednesday on a cautious upswing, with the S&P 500 up 0.4%, the Nasdaq gaining 0.7%, and the Dow flat, as strong earnings from major tech and banking firms helped offset broader concerns. Bank of America and Morgan Stanley led financials after beating expectations, boosting sentiment despite lingering worries over regional bank credit stress. At the same time, delays in economic data releases caused by the US government shutdown added to uncertainty about underlying momentum. The combination of solid earnings, trade tensions, and incomplete economic signals left markets treading water, highlighting both short-term resilience and fragile stability as investors await clearer direction on policy and growth.
- Walmart’s partnership with OpenAI helped lift its shares 5% to a record high, putting the retailer on track toward a trillion-dollar valuation, Mizuho analyst David Bellinger said on Wednesday. The deal, announced on Tuesday, lets shoppers browse and buy products via ChatGPT, including packaged foods and apparel from Walmart and Sam’s Club, though fresh foods are excluded. The gain marked Walmart’s biggest one-day jump since April, pushing its market cap above $854 billion.
- ASML Holding said demand for its advanced chip-making machines is surging amid the AI boom, signalling optimism after earlier warnings about the trade war. The Dutch firm reported higher-than-expected third-quarter bookings. Shares rose as much as 4.8% on Wednesday, with ASML up 30% this year, making it Europe’s largest company by market value. ASML, the sole maker of extreme ultraviolet lithography machines for advanced chips, is benefiting from AI infrastructure spending, including OpenAI deals for data centres and chips worth over $1 trillion.
- LVMH shares surged as much as 14% on Wednesday, marking their biggest daily gain since 2001, after signs of stronger demand in China helped the luxury group beat quarterly sales forecasts. The rally lifted rival luxury stocks, including Hermes, Kering, Richemont, Burberry and Moncler, by 5% to 9% adding nearly $80 billion to European luxury valuations.
- As at Thursday’s close, the S&P 500 was 1.17% up for the week.
Local News
- The IMF on Tuesday slightly raised its 2025 growth forecast for the country to 1.1% from 1%, while 2026 is now projected at 1.2%, down from 1.3%. Despite the revision, South Africa remains below most emerging markets, which are expected to grow 3% to 4% or more. Globally, the IMF lifted its 2025 growth forecast to 3.2% from 3.0%, citing agile private sectors, trade deal negotiations and largely open trading systems.
- Cash held by non-financial companies has surged by R700 billion over six years, reaching a record R1.8 trillion at the end of July, the Reserve Bank’s September bulletin released on Monday shows. Companies are hoarding cash amid low growth, high inflation and economic uncertainty while staying ready to invest when confidence returns. The buildup, accelerated during the COVID-19 pandemic, puts pressure on President Cyril Ramaphosa to convert liquidity into investment to revive growth.
- A new report released by the African Centre for Economic Transformation on Tuesday showed that South Africa currently spends about R386 billion per year servicing its R5.7 trillion debt, more than one-fifth of government revenue. The report models scenarios capping debt repayments at 5%, 10% or 14% of revenue, and finds that reducing the debt‐servicing burden could free up billions of rand for investment in essential social sectors like health, education and infrastructure, thereby accelerating South Africa’s progress toward the Sustainable Development Goals.
- At PSG’s #ThinkBigSA panel this week, financial leaders warned that, although South Africa’s capital markets are deep and well developed, they are failing to drive economic growth and job creation. The JSE ranks 19th globally, with a market capitalisation of 250% of GDP, but over 40% of listed companies’ income comes from outside the country, reflecting persistent offshore capital outflows, weak domestic investor appetite, and structural barriers to local investment. Outgoing JSE CEO Dr Leila Fourie called for policy reforms, improved tax efficiency for investors and SMEs, and greater financial literacy.
- Cabinet on Wednesday approved a new R2.23 trillion Integrated Resource Plan (IRP), which will guide its electricity mix over the coming decades, aiming to balance supply and demand, reduce carbon emissions, and lower power costs. The plan builds on the 2023 IRP by incorporating revised demand forecasts, expanded generation capacity, and a strong push to integrate renewables into the national grid. Cabinet also confirmed a refreshed board to oversee implementation, with Mteto Nyati retained as Chairman.
- Shoprite on Monday warned that food insecurity is at its worst level in more than a decade. The retailer’s latest food security index found that 21% of children under five are stunted due to malnutrition, an unusually high rate for a middle-income country. Shoprite said widespread malnutrition and joblessness threaten social stability and may reignite debate over a permanent basic income grant. Nearly 4,500 children under five have died from malnutrition in the past five years, with KwaZulu-Natal recording the most deaths.
- DHL has committed €300 million (R6 billion) to expand its operations across Africa, with South Africa positioned to receive around €50 million over the next five years, reflecting improving confidence in domestic infrastructure. The decision announced on Wednesday is partly driven by a marked turnaround at Transnet, which has improved operational reliability and made further investment in South Africa a more compelling prospect.
- Nearly half of Combined Motor Holdings’ new vehicle sales are now Chinese and Indian brands, displacing traditional marques, the JSE-listed group said on Tuesday. The shift to more affordable vehicles helped its motor retail and distribution unit more than double pretax profit in the six months to August. The results lifted its share price over 7% on Wednesday as it reported a 16.3% increase in revenue.
- Aspen Pharmacare has received approval from the South African Health Products Regulatory Authority for its diabetes drug Mounjaro to also be used for chronic weight management, BusinessLIVE reported on Monday. Mounjaro, launched by Aspen a year ago, has gained strong traction among South African consumers. The company said last month it expects the drug to generate R1 billion in sales within a few years. The approval comes as obesity rates rise, with research showing one in four South African adults is obese.
- As at the time of writing, the rand was 0.5% stronger against the dollar, and the ALSI was 1.3% up for the week.
Sources: Dynasty, Bloomberg, CNN, BusinessLIVE, Business Report, Reuters, NYT, ITWeb, AFP, etc.
