Can you believe that another year is almost done and dusted? 2024 will be known as the year of the election and we will offer some thoughts on the US election which has recently occurred. But there is another holiday in America at this time of year which, in our minds, represents a practise that we would do well to follow, namely Thanks Giving (and NOT Black Friday!)
If we consider the journey our country has been on, we have MUCH to be thankful for. It was little over a year ago that Loadshedding tables dominated our lives and at the start of the year, there was much uncertainty around the direction our government would follow. Since our elections and the formation of the GNU, we have seen more stability, positivity, economic growth and there seems to be a proverbial light at the end of the Eskom tunnel (which was so hard to find in the midst of January power cuts). We recently heard a talk from Malcom Charles at Ninety One and were so encouraged by his input around the state of our nation. Feel free to read the summary as per the below link:
South Africa back on track? | Ninety One | South Africa
As we turn our attention to the latest news and financial markets, the big question being asked is, “What does a Trump Presidency mean for America and the world?” (with credit to Old Mutual writer, Izak Odendaal)
Now that the dust has settled somewhat following the US election, we can ask more clear-eyed questions about what lies ahead. That doesn’t mean, however, that we have complete certainty.
The only certainty that investors have today compared to the start of the year is that Republicans control both the White House and Congress. Much else is up in the air.
Much of Trump’s campaigning focused on Making America Great Again (MAGA), which was a very focused view on prioritising American interests above those of the rest of the world. Part of this strategy spoke to the implementation of tariffs on cheap imports, especially from China and their cheap electric vehicles (was it no wonder Elon Musk is now featuring so prominently on Trump’s team?). There is however, usually a lag between policy changes and the impact on the real economy, and these policies might not be implemented immediately, if at all. For now, what we do know is that market expectations for rate cuts have been scaled back considerably, and the expectation is that global inflation may be higher for longer.
When it comes to South Africa, there are a few related questions to ponder. Firstly, how much will South Africa be impacted by US tariff increases? Our belief is that the impact will be minimal, despite the media hype around the AGOA agreement. The US is an important export partner for South Africa, but not really the other way around. South Africa runs a trade surplus with the US, meaning we export more goods to the US than we import from the US. That might seem hard to believe, given the popularity of American brands in South Africa, but bear in mind that your Levi jeans, Apple iPhone and Nike shoes were probably not made in America. It makes South Africa vulnerable to US tariffs, though we are unlikely to be high on Trump’s agenda since the surplus is small when viewed from America’s perspective.
Secondly, how does the South African Reserve Bank respond to a higher-for-longer US rate outlook?
Our central bank will of course keep a close eye on what the Federal Reserve does and is also likely to be more cautious. However, it is likely to continue cutting the repo rate (as happened last week) as domestic inflation is set to remain on target during 2025.
Needless to say, however, there is considerable uncertainty in all of the above. Navigating the next four years will require greater patience on the part of investors, and the ability to look through the noise to focus on fundamental changes. It also means diversification will be our best friend in 2025, as we try to expect the unexpected.
GDA Housekeeping:
Please be advised that our offices will be closed and unable to process transactions between the 23rd December and the 6th January 2025. As such, please could you provide any payment or investment instructions by Friday the 20th December 😊
On another note, as part of ongoing FICA requirements, we require updated client proof of addresses. When you get a moment, would you please email us your latest proof of address at gda@gda.co.za
On a personal note, Christmas time for us at GDA is a time of deep rest, holiday with family, friends and tank filling activities. We are reminded again of the difference between resting from work and working from rest. Resting from work can be as simple as not working, but it doesn’t necessarily re-fill our tanks. Working from a place of rest is where we have done something energising and our capacity for relationship and work is replenished.
If one simply only takes time off, within a few days of returning to work, we feel as drained as if we never had a holiday. In contrast, when one fills their tanks with life-giving activities (such as exercise, seeing family and friends, travel, reading, listening to or playing music), you find that you have far more capacity for work, relationships and life. Our hope for everyone this December is for a dedicated period of both rest and rejuvenation, as well as an opportunity to see the bigger picture around everything we have to be thankful for.
From Wes, Dave, Jono and the GDA Team.