Eben Louw

The first half of 2025 has been relatively rewarding for investors, despite a highly volatile global landscape. While the US economy remains resilient, with some potential tailwinds from the ‘big beautiful bill’, the inflationary impact of tariffs still needs to filter through to households.

There is a significant divergence in the hard and soft economic data in the US, with little certainty about which side will correct first. Trade negotiations and further relaxation of strict reciprocal tariffs would be a welcome development. However, the effective US tariff rate will still likely end up at its highest levels since 1930. Furthermore, the various conflicts and tensions raging around the globe (Iran-Israel, Russia-Ukraine, India-Pakistan, China-Taiwan, etc) will likely continue to impact risk appetite and cloud the picture during the third quarter.

Given this landscape, we continue to hold highly diversified exposures, favouring regions and assets with favourable valuations and economic tailwinds (such as stimulus capacity). These include South Africa, China, and Europe. In South Africa, momentum remains positive, albeit fragile. A benign inflation outlook, capacity for rate cuts and a more competitive currency should support sentiment and attractively valued local assets. We therefore continue to hold healthy exposure to local equities and bonds. Where offshore exposure drifted below neutral, we trimmed some profits from the local equity positions and used the recent bouts of rand strength to move this back to neutral, allocating to short-term global fixed income and non-US equity. 

‍