Explore the economic implications of Donald Trump's policies on global markets and the South African property sector, as experts weigh in on the potential risks and opportunities. File photo.
In Upsy Down Town
The sky is in the sea,
The fish are in the air
Where the birds should be.
The rain is falling up
Instead of falling down,
In the world of Upsy Down Town.
– Beth Shosham, based on a traditional nursery rhyme.
These words are from a children’s book beloved by my son before he outgrew such childish things. Towards the end of the book (spoiler alert!), unable to bear the irrationality of a topsy-turvy universe any longer, the world yells “STOP!”. Then you turn the book upside down and everything rights itself.
In Downy Up Town
The sea is down below,
The clouds are in the sky,
The fish know where to go.
The birds are in their nest,
They really need the rest.
It seems we’ve warped into that crazy universe, where friends are viewed as enemies and enemies as friends, where lies are accepted as truths and truths as lies. Oh that we could all cry “STOP!” in worldwide unison and put everything the right way up again.
Newly elected US president Donald Trump says he is restoring “common sense” to America, but, no matter how hard I try, I find little common sense in many of the actions he has taken in the past two weeks.
Why, for no good reason, would you make an enemy of Canada, your biggest trading partner with whom you enjoy a long-standing, mutually beneficial economic relationship? To probe one of Trump’s reasons, only about 0.2% of the banned drug fentanyl seized coming into the US last year came from Canada. And did you know that 67% of the US’s imported crude oil comes from Canada, against only 4% from Saudi Arabia? (Source: Reuters)
Investor jitters
Trump’s disruptive policies are shaking financial markets, and this comes on top of new competition from China to the American AI industry, which caused a temporary crash in tech stocks recently.
In a report titled “Traversing Trumponomics”, Herman van Papendorp, head of the asset allocation at Momentum Investments, said we need to acknowledge that Trump’s policies represent a significant departure from the past. “As such they have the potential to influence asset class performance and returns, at least in the short term. At the very least, we should expect elevated volatility in global markets as Trump’s policy announcements (either positively or negatively) surprise market expectations.
“Certain policies – such as tax cuts and financial and energy sector deregulation – are expected to support US economic growth and, by extension, benefit the US equity market over time. Conversely, protectionist measures, including tariff increases and stricter immigration policies, may have a contractionary effect on the US economy but an even more pronounced negative impact on global and emerging market economies and equity markets,” Van Papendorp said.
The retail team at Sygnia points to unintended adverse consequences for the US, but argues that investors need to remain grounded in the fact that markets are ultimately cyclical.
“The perception of the US as a reliable and predictable trading partner has been eroded, which is likely to prompt other nations to re-evaluate their economic dependencies and trade alliances. In time, this may translate into new political alliances, with superpowers such as China and India strengthening their positions on the global stage.
“While Trump’s tariffs and threats of tariffs may provide a degree of short-term protection for US domestic industries, the broader economic, political and strategic costs are likely to be considerable.
“Investors should prepare for longer-term heightened market volatility. Unfortunately, the recovery is unlikely to mirror that of the post-Covid era this time around. The forced realignment of trade policies is likely to reshape market dynamics, introducing more risk than immediate opportunity. However, markets remain cyclical. The best strategy right now is to remain calm: avoid panicking or selling off assets at a loss. Remember, savings are a long-term game…” the Sygnia team says.
Property market
On the ripple effects of Trump’s policies on the South African property market, Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa says that although the market is predominantly influenced by domestic factors such as interest rates, inflation, and local investor confidence, the broader international landscape can’t be ignored.
One of the key factors to consider is the strength of the rand against the US dollar. An ‘America First’ policy may detrimentally affect emerging market currencies, including the rand. A weakened rand raises import costs and could drive inflation, leading to increased pressure on the Reserve Bank to adjust interest rates. Higher interest rates generally reduce affordability for homebuyers and dampen the overall demand for property.
However, there are potential upsides. Goslett notes that uncertainty on the global stage often drives high-net-worth individuals to seek property investments in stable markets. “South Africa’s real estate sector offers attractive opportunities for foreign investors seeking value for money. This might mitigate some of the negative consequences of broader global economic challenges,” he says.
* Views expressed in this article do not necessarily reflect the views of Independent Newspapers.
* * Hesse is the former editor of Personal Finance.
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