While the initial reactions to Wednesday’s Fed rate cut – the first for the year – were muted to slightly negative, US equities markets resumed the trend to be in sync yesterday as the S&P 500, the Nasdaq 100, the Dow Jones Industrial Average and the Russel 2000 (the US small-cap index) all hit record highs. According to data compiled by Bloomberg, the rare feat of all four major benchmarks closing together at fresh highs has only occurred on 25 other days this century.
The gains in the Dow Jones Industrial Average and Russell 2000 are noteworthy because these indices include domestically oriented companies that stand to benefit more from cheaper borrowing costs and are less exposed to the Big Tech and AI stocks that have powered the Nasdaq and S&P 500 to numerous record high closes this year. The 25-basis point cut was widely anticipated, and markets would most likely have reacted negatively if the Fed had held interest rates steady once again.
All voting members of the Fed’s Open Market Committee backed the cut, bar one. The sole dissenter was the newly appointed US President Donald Trump’s ally, Stephen Miran, who preferred a deeper half-point cut. Fed Chairman Jerome Powell has remained independent in the face of growing political pressure to accelerate the rate cutting cycle.
Powell cited a weakening labour market as the chief driver behind the cut. Hiring has slowed down sharply, and recent revisions to employment data show that the job market is cooling more than previously thought. Inflation remains above the Fed’s target, though the effects of tariffs on prices have so far been more subdued than expected.
Powell described the rate cut as a form of risk management, based on the premise that downside risks to the labour market have increased and come into closer balance with the upside risks to inflation. The Fed assessed monetary policy as “clearly restrictive” and thus decided that monetary policy should be loosened.
Looking ahead, the Fed has pencilled in at least two more 25 basis points cuts before the end of the year. These are effectively priced into expectations, and deviation could disappoint investors. Powell’s commentary cautions markets that he has “no risk-free path” for the coming months.
Longer term, investors will be watching for signs that the Fed’s independence remains sacrosanct. Powell’s term is due to end in May, following months of assaults on the Fed from Trump. Markets will want to know that the Fed is in safe hands when Powell is replaced with a new Trump appointee.
“The Federal Reserve is cutting rates during a time when stocks are at record highs, and the economy is still growing. This dynamic is positive for stocks.”
– Robert Schein, Blanke Schein Wealth Management
Global News
- Powell managed to unite a divided committee around a quarter-point rate cut on Wednesday, the first of the year, lowering the target range to 4% to 4.25%, despite rising political pressure and economic uncertainty. Lawmakers have been pushing for more aggressive relief, while some Fed members feared cutting too soon could stoke inflation. With signs of labour-market softening and lingering inflation, Powell emphasised that trade-offs ahead will be difficult, “there are no risk-free paths now,” and signalled the need for rate decisions to respond flexibly to incoming data, balancing both economic and political headwinds. While the decision was nearly unanimous, the lone dissent came from Fed Governor Stephen Miran, who favoured a larger reduction, and policy makers are still split over the outlook for rates.
- Gold slipped 1.2% after hitting record highs, but despite the pullback, gold remains on a strong upward trend driven by low yields, inflation concerns and safe-haven demand, with analysts projecting further gains ahead.
- US retail sales rose 0.6% in August, the third straight monthly increase, the Commerce Department said on Tuesday. The figures beat all estimates in a Bloomberg survey. While auto sales grew slower than expected, the report showed consumers are still spending despite tariffs, subdued sentiment, and a cooling labour market. Wage growth has slowed, but many workers’ pay continues to outpace inflation, with wealthier households also benefiting from the stock market rally. The top 10% of US earners drove almost half of consumer spending in the second quarter to the highest percentage share since 1989, Moody’s Analytics chief economist Mark Zandi said on the back of the data.
- Trump on Monday urged the SEC to switch US corporate reporting from quarterly to six-monthly, saying on Truth Social it would “save money” and let managers focus on running their companies. He added, “China has a 50-to-100-year view on management… whereas we run our companies on a quarterly basis??? Not good!!!” Half-yearly reporting would align the US with the UK and some EU countries. Supporters say it could encourage long-term planning, while critics warn it would reduce transparency and risk more market volatility. Any such move would be subject to SEC approval.
- A federal appeals court on Monday blocked Trump’s attempt to remove Federal Reserve Governor Lisa Cook, which allowed her to participate in the Fed’s two-day policy meeting that began on Tuesday. The US Court of Appeals for the DC Circuit upheld a lower court’s temporary order, with two of the three judges warning that Cook’s removal could unsettle financial markets and undermine the Fed’s independence. On Thursday, Trump asked the appeals court to pause that ruling to clear the way for her dismissal, and later the same day, the Trump administration petitioned the Supreme Court to immediately permit the President to fire Cook, setting up a major test of presidential authority over the Fed with potentially far-reaching economic consequences. (US Treasury Secretary Scott Bessent was previously reported to have filed the same kind of contradictory mortgage-application “principal residence” pledges that Trump is citing in his bid to oust Lisa Cook.)
- On Wednesday, Trump hailed the “special relationship” between America and Britain as “priceless and eternal” during a state visit marked by grand royal pomp at Windsor Castle. Hosted by UK PM Keir Starmer and King Charles III, Trump called the reception “one of the highest honours of my life”. The visit paired pageantry with plans to boost trade and investment, highlighted by commitments of £150 billion from US companies, dubbed the “Tech Prosperity Deal”. Starmer and Trump yesterday hailed a “new era” in US-UK ties with £250 billion investment pledged in total between the two countries, spanning defence, nuclear, trade and technology.
- Microsoft, OpenAI and other US firms plan to invest over $42.3 billion in UK tech infrastructure, including AI systems, quantum computing and other projects, the UK’s Department for Science, Innovation and Technology said on Tuesday. The announcements coincide with Trump’s visit and include Silicon Valley leaders such as Nvidia CEO Jensen Huang and OpenAI’s Sam Altman, who is bringing its Stargate program to the UK. The moves support PM Keir Starmer’s push to boost US ties and tech growth, including faster data centre approvals, easier grid access, and a new AI Growth Zone aimed at creating jobs.
- Foreign investors are returning to China’s stock markets, drawn by tech opportunities and diversification beyond US assets. Gains in AI, semiconductors and drug development suggest trade tensions have not stalled Chinese innovation. The Shanghai Composite recently hit a decade high and Hong Kong stocks a four-year peak, aided by a US-China tariff truce and monetary easing. Brett Barna, a New York-based fund manager, said on Wednesday that early foreign investors are already joining a rally so far led mainly by domestic players.
- Intel said on Monday that it has lowered its full-year 2025 adjusted operating expense target to $16.8 billion from $17 billion, following the deconsolidation of its programmable chip unit, Altera. Shares rose nearly 4% as investors welcomed the cost reduction. In a major vote of confidence, Nvidia announced on Thursday it will invest $5 billion in Intel, taking about a 4% stake once new shares are issued, just weeks after the US government secured a 10% holding in the struggling chipmaker, which is now worth $25 billion after Intel shares soared 23% on Thursday.
- Alphabet joined the $3 trillion club on Monday as shares rose 4.5% to $251.61, giving the Google parent a market value of $3.04 trillion. The stock has gained over 70% since April, adding about $1.2 trillion. Only Nvidia, Microsoft, and Apple are also valued above $3 trillion. Gains followed an antitrust ruling that avoided the harshest penalties, including a forced sale of Chrome, and strong second-quarter earnings showing AI-driven sales growth. Citigroup analyst Ron Josey raised his price target to $280, citing faster product development and wider Gemini adoption across Ads and Cloud.
- Tesla shares rose 6% Monday after CEO Elon Musk disclosed buying about $1 billion of the company’s stock, his first open-market purchase since early 2020. The purchase is seen as reinforcing his confidence and commitment to Tesla as it aims to expand into AI and robotics amid slowing car sales. The move follows the board’s $1 trillion compensation plan for Musk, setting ambitious targets.
- On Wednesday, Meta Platforms launched its first consumer-ready smart glasses, the Meta Ray-Ban Display, with a built-in display and wristband controller. CEO Mark Zuckerberg said they provide “personal superintelligence” with AI-powered notifications, communication aids, and memory support. The launch at Meta’s Connect conference in Menlo Park, California, follows the success of its Ray-Ban line and advances its push into AI-enabled consumer products.
- As at Thursday’s close the S&P 500 was 0.72% up for the week.
Local News
- The South African Reserve Bank (SARB) held its benchmark interest rate at 7% yesterday, choosing to pause cuts despite inflation cooling faster than expected and moving closer to its newly stated goal of hitting around 3%. The rate decision followed a period in which the bank cut rates three times since September 2024 and was split on the move, with four members supporting holding steady, while two preferred a further cut. Inflation for August eased to 3.3%, helped by softer food and fuel prices, giving the central bank room to be cautious. At the same time, SARB lifted its economic growth forecast for the year to 1.2%, up from earlier estimates, while slightly revising the inflation forecast to 3.4% due to anticipated inflation pressures over the next few months.
- Moody’s expects that South Africa’s economic growth over the next two years is likely to remain under 1.5%, putting it far behind the 4.7% growth rate expected across sub-Saharan Africa. The rating agency indicated that weak demand from major trade partners like China, plus global headwinds, will weigh heavily on growth, BusinessLIVE reported on Wednesday. While Moody’s projects stable credit fundamentals over the next 12-18 months, it cautioned that risks such as rising borrowing costs, fiscal slippage, or social unrest could further undermine the outlook.
- Moody’s also warns that South Africa is caught in a “debt trap” driven by high borrowing costs that stem from weak growth, shaky investor confidence, and structural obstacles. Because growth has been subdued, the Reserve Bank feels compelled to keep interest rates high to attract foreign capital, but those high rates in turn suppress domestic investment and tax revenue, further limiting economic momentum. The country’s debt-to-GDP ratio has more than doubled over the past 15 years, and Moody’s says that unless reforms are accelerated, especially in areas like infrastructure, state-company performance, and borrowing strategy, South Africa will struggle to break the cycle of fiscal strain and slow growth.
- A new S&P Global analysis published on 17 September warns that South Africa’s gold industry is facing a perilous future, as global gold prices rally but exploration and investment in new deposits remain sluggish. Key findings include that despite nearly three billion ounces in reserves, resources and past production discovered globally between 1990 to 2024, South Africa is not keeping pace in finding major new gold deposits. The report cautions that falling output and weak capital investment threaten the long-term sustainability of one of the country’s most iconic export and employment sectors.
- Home Affairs Minister Dr Leon Schreiber yesterday unveiled the new AI-powered Electronic Travel Authorisation system as part of a broader drive to fight corruption and strengthen the integrity of South Africa’s visa and identity services. Schreiber said loopholes in the current paper-based processes have allowed collusion and fraud, including cases where falsified documents and insider assistance enabled foreign nationals to enter the country illegally. This initiative forms part of a wider digital reform drive, which also includes more secure passports and the rollout of smart ID applications through major banks to close systemic gaps exploited by criminal syndicates.
- South African municipalities have racked up R25.1 billion in unpaid water bills, BusinessLIVE reported on Wednesday, because of weak revenue collection, historic arrears, billing disputes and poor financial management, including the diversion of utility surpluses into other budgets. To address the crisis, the government is withholding equitable-share transfers from defaulting councils, negotiating payment plans for historic debts, ring-fencing disputed amounts, and deploying local government interventions to improve financial discipline. National Treasury is also using enforcement measures under section 216 of the Constitution to pressure the worst defaulters, and officials report early signs that the tougher stance is starting to improve compliance.
- South Africa’s public service may lose over R3.9 billion annually to ghost employees, Parliament was told on Wednesday. National Treasury, the Department of Public Service and Administration, as well as the Auditor-General of South Africa, are investigating fraud across all three government spheres, including fictitious staff, no-shows, and family members on payrolls. Treasury flagged duplicate personnel and salary profiles in the PERSAL system, payments to minors, and multiple allowances to the same individuals.
- President Cyril Ramaphosa acted quickly yesterday to quell a backlash after suggesting that the ANC risks losing voter support unless it begins to learn from DA-run Municipalities. Speaking to the SABC, he softened his earlier remarks by saying, “maybe you can say it got lost in translation. In the end, we must all learn from each other,” adding that he “should have talked about the full equation”. The gesture appears intended to calm tensions within the ANC and reassure supporters that his critique of the party was not an endorsement of the opposition, but rather a call for improvement.
- The South African Revenue Service published draft regulations for the Crypto-Asset Reporting Framework this week, seeking public comment. The OECD-developed framework ensures crypto-assets aren’t used to hide wealth or avoid tax and aligns South Africa with global transparency standards. Draft rules require crypto service providers to report on covered assets, relevant users and entities, transaction details, and steps to verify users’ tax jurisdictions.
- Retail sales rebounded in July, led by clothing, general dealers, and hardware, signalling household consumption will remain a key driver of early third-quarter growth. Statistics South Africa reported a 5.6% year-on-year rise in real retail trade on Wednesday, the strongest annual increase since April. Seasonally adjusted month-on-month sales rose 2.1%, reversing June and May contractions. Tailwinds supporting consumers include low inflation, lower interest rates, renewed access to their two-pot retirement savings, and employment created in the public sector.
- South African companies are expanding in Namibia as the country’s oil and gas discoveries drive rapid economic activity, BusinessLIVE reported on Wednesday. Bidvest said it is investing R120 million to expand logistics capacity, including a multipurpose terminal and import warehouse. The US International Trade Administration said, if Namibia’s oil finds are commercially viable, the country could rank among the world’s top 15 oil producers by 2035, generating major state revenues. Banks and law firms are also positioning to capture opportunities from the surge in investment.
- Prosus-backed Urban Company made a strong debut on India’s National Stock Exchange on Wednesday, with its shares soaring more than 70% on the first day of trading. The listing, the second IPO in the Naspers portfolio under CEO Fabricio Bloisi, values the home services platform at nearly R52.2 billion, up from a pre-IPO valuation of R31 billion. This follows Naspers’ Monday announcement that it will split its stock to lure investors as it continues to try to unlock value from its diverse portfolio, where other assets are overshadowed by its R1.7 trillion stake in Tencent.
- Discovery’s Vitality brand is rapidly gaining ground in the UK health insurance market, as frustration with the NHS drives more consumers to private options, Daily Investor reported on Tuesday. The insurer now covers over two million lives, claiming on average to extend clients’ lifespans by five years compared with other providers. CEO Adrian Gore says the UK is the first market where Discovery had to build brand recognition from scratch to set itself apart from competitors like Aviva, Zurich, and Royal London.
- Momentum Group on Wednesday reported record earnings for the year ended June, with normalised headline earnings up 41% to R6.26 billion and normalised headline earnings per share rising 46%. The group said results were driven by strong performances across its business units, including annuity profits in Momentum Investments, new business growth in Metropolitan Life, improved underwriting at Momentum Insure and Guardrisk, and higher group risk earnings.
- As at the time of writing, the rand was 0.15% stronger against the dollar, and the ALSI was 0.5% for the week.
Sources: Dynasty, BusinessLIVE, Bloomberg, CNN, Reuters, Daily Investor, NYT, BBC, ITWeb, Daily Maverick, etc.
