| The podcast to this newsletter can be listened to here. Markets and Economics The JSE. The JSE All Share Index (SAALL, more commonly still called the ALSI – despite the change taking place in 2002) fell to 98,520 points by July 31, 2025. Despite this weekly dip, the index is up about 1.66% for the month and 20.34% year-to-date, reflecting underlying resilience. The SARB’s recent repo rate cut contributed to resilience in local equities, supporting financials and select industrials. The rand traded firmly leading up to the policy announcement, providing some support to offshore-earning stocks. Commodity-heavy companies such as AngloGold Ashanti saw outsized volatility amid global commodity price swings. South African equities moderately outperformed several global peers on a year-to-date basis, though the past week was muted ahead of both US and Asian central bank decisions.  Key Takeaway: The JSE experienced a modest pullback this week after a strong year-to-date run, with the SARB’s rate cut, stable rand, and global economic trends shaping performance. Sectors were mixed, with financials benefiting and resources coming under pressure from commodity price shifts. Around the globe: The IMF’s July 2025 World Economic Outlook update projects global growth at around 3.0% for 2025 and 3.1% in 2026. This represents a slight upward revision from earlier forecasts due to factors like tariff adjustments, better financial conditions, and fiscal expansions in key regions. However, persistent uncertainties remain, including geopolitical tensions and trade policy risks, which could disrupt growth and inflation trajectories. The ECB maintained its deposit rate at 2.0% amid ongoing trade negotiations with the US, keeping monetary policy cautious as it waits for clarity on tariff impacts and inflation trends in the Eurozone (In true Trump fashion, that much-publicised deal has a long way to go before it can really be called a ‘deal’). Markets remained relatively stable with the Euro around $1.17 against the dollar. Strong earnings reports from global technology firms, particularly those with significant AI investments like Alphabet, helped push global equity indices to new highs. This AI-driven optimism is observed worldwide, influencing multiple sectors beyond the US, including Europe and Asia. Recent progress in trade talks, notably involving the EU and other major partners, has led to anticipated tariff rates lower than initially feared (e.g., 15% instead of potentially 30%). This reduction is helping to ease concerns about a global trade war and is contributing to bullish global market sentiment. Emerging markets continue to face challenges with uneven growth. While India maintains a strong GDP growth of around 6.5%, China slows to approximately 4.5%, affected by structural property issues and demographic trends. Latin America, including Brazil, is expected to grow more slowly in 2025 amid fiscal constraints. These diverse regional trends highlight ongoing global economic bifurcation. US employment numbers revised – significantly The latest U.S. labour numbers that came out on Friday, for July 2025, reveal a notable deceleration in job growth, with only 73,000 jobs added—substantially below expectations and preceding months’ figures – until those too were revised downward.  I would hazard a guess that Powell was not aware of these downward revisions when he made his decision not to drop interest rates. Non-farm payrolls are a major indicator of a good US economy, and these (revised) numbers are disastrous. The unemployment rate ticked up to 4.2%, up from 4.1% in June. This slowdown is compounded by striking downward revisions to previous months: May and June’s job gains were slashed by a combined 258,000, leaving only 19,000 jobs added in May (down from 144,000) and just 14,000 in June (down from a previous 147,000). These revisions mark the weakest three-month period for payroll growth since the pandemic era, with an average of just 35,000 jobs created monthly. Most of July’s gains came from health care, social assistance, retail, and finance, while the federal government and manufacturing continued to contract. Analysts highlight that these figures amplify concerns about the resilience of the U.S. labor market amid persistent trade and tariff pressures, and may prompt calls for Federal Reserve rate cuts at upcoming meetings.  RSA Interest rates The latest decision by the South African Reserve Bank (SARB) is a unanimous 25 basis point cut to the key policy rate, lowering the repo rate to 7%, effective from 1 August 2025. This is the lowest level since November 2022 and reflects the SARB’s response to subdued domestic economic activity, moderate inflation, and ongoing global uncertainty, including risks linked to new US tariffs and incomplete trade deals.  SARB REPO RATE The SARB Monetary Policy Committee emphasised that with June 2025 inflation at 3% and core inflation at 2.9%, both near the lower end of the target range, there is room for a lower interest rate trajectory. The central bank also indicated a strategic shift: it now seeks to anchor inflation expectations closer to 3% (the bottom of its 3–6% range) and is planning further target reforms to sustain permanently lower inflation. This is good news for the exchange rate. This rate cut aims to provide relief to consumers and businesses, supporting economic activity in an environment of weak growth, a stronger rand, and declining fuel prices. Growth forecasts have been revised down to 1% for 2025 as the SARB continues to prioritise price stability and policy modernisation.  Federal Reserve Interest Rate Decision As widely anticipated (by everyone except Trump), the Fed held its interest rates steady at the 5.25%-5.5% range as expected in its July meeting. Investors were closely watching Fed Chair Jerome Powell’s comments for signals about possible rate cuts in the near future, but the Fed maintained a cautious tone given ongoing inflation concerns. The Fed, and many other analysts, feel that the effect of the tariffs is still to be felt in the economy, and once the ‘pre-bought’ inventory stock piles are over, and companies cannot ‘eat’ the increases without impacting earnings, then those increases are going to start filtering down to the consumer.  Clothing and textiles: Prices for shoes and apparel have jumped by 39% and 37% respectively in the short run, probably stabilising at 17%–18% higher in the long run.Food: Average food prices have risen 3.4% in the short run and are expected to remain nearly 3% higher long-term. Fresh produce saw especially sharp increases.Motor vehicles: New car prices are up 12.3% in the short run, which translates to nearly $6,000 more on the average 2024 model vehicle.Household goods: Toys, appliances, sporting goods, and tools—items heavily reliant on imports—are cited as showing rising prices after inventory depletion as higher tariff rates take effect. Budget Lab have written an interesting article on the creeping tariffs, and estimate that they will cost the average US consumer $1500-$2000. This is a tax, pure and simple, no matter which way the Trump administration wants to spin it.  |
| One tariff case study: It’s bananas! Why Bananas? Over 82% of American households buy bananas, the most popular fruit, followed by apples (78%), Grapes (63%) and Strawberries (60%).  There are a few bananas grown in Hawaii (4,6 million pounds), but not enough to even satisfy local demand (36 million pounds of bananas). This highlights the absurdity of the everything-made-in-America narrative pushed by the Trump regime. It boils down to weather. Bananas require a warm, humid, frost-free climate with optimal temperatures between about 22°C and 31°C. If the temperature falls below 14°C, growth is stunted. Pre-tariffs: For many years, banana prices in US supermarkets were relatively stable. For example, Trader Joe’s charged $0.19 per banana until 2024, then increased to $0.23 per banana last year. In early 2025, the national average price was about $0.62 per pound in February and $0.63 per pound in April, according to Consumer Price Index data. (In RSA, the cost per banana is around R3 or $0.165). Post-tariffs: After the White House imposed a 10% tariff on imported bananas in April 2025, prices began to rise. By May 2025, the average price reached $0.66 per pound, a 3.3% jump from the previous month. Individual retailers followed suit: for example, Walmart raised their banana price from $0.50 to $0.54 per pound by May, an 8% increase.  EU Tariff ‘deal’ On July 27, 2025, the US and EU reached a major trade agreement, averting a threatened trade war. President Trump and European Commission President Ursula von der Leyen announced a compromise: most EU exports to the US will now face a 15% tariff, which is half the 30% tariff Trump had threatened for August 1, but still much higher than the 1.2% (2024 average) or 10% (prior months in 2025).In return, the EU agreed to eliminate certain tariffs on US goods (notably cars, reducing EU tariffs from 10% to 2.5%), purchase $750 billion in US energy products over three years, and invest another $600 billion in the US economy. The EU will also buy hundreds of billions of dollars’ worth of American military equipment. The EU narrowly avoided the 30% tariff after last-minute negotiations in Scotland, with both sides conceding ground they had resisted for months. Critics within the EU view the deal as “unbalanced” and a concession to US pressure; some leaders, like Germany, are relieved (as the auto tariff is lower than feared), while others (France, Italy) are seeking exemptions for their key exports. The deal falls short of the more favourable 10% tariff secured by the UK, and many in Europe fear it will erode EU competitiveness long-term.  While the agreement stabilised financial markets, with immediate bullish reactions as the risk of a transatlantic trade war faded. Both parties present the deal as a success, but underlying concerns remain: the EU will be more dependent on US energy and defence products, and the US expects the deal to generate tens of billions annually in new tariff revenue. Full technical details—including sectoral exemptions, quota systems, and schedules for further negotiation—are still being clarified by both governments. In summary, the EU-US deal offers important trade peace in the short term and avoids harsher US tariffs, but many in the EU see it as a coerced compromise with significant long-term costs and strategic uncertainties for Europe.  Energy fact check: As with most of Trump’s announcements, when you look under the covers, there is a load of hot air. (Mr Global, @mrglobal2.0 on TikTok and YouTube, is a good layperson’s source of info on energy in the US – he is also a Forbes contributor, so knows his stuff.) So, the United States cannot currently increase energy exports to the EU by an additional $250 billion per year over the next three years as stipulated in the recent trade agreement. Here’s why: Current US energy exports to the EU are about $76–$83 billion per year, including oil, liquefied natural gas (LNG), and coal. The deal would require the EU to more than triple its imports from US sources, jumping to $250 billion annually. Total US global energy exports in 2024 were projected to be around $318–$332 billion, meaning that to meet the EU’s goal, the vast majority of all US energy exports would need to be redirected to Europe, which is not practical given existing supply agreements and global demand. US LNG export capacity is expanding rapidly, with several new facilities (Plaquemines, Corpus Christi Stage 3, Golden Pass) coming online between 2025–2027, almost doubling LNG export capability. However, even with these expansions, there are timetables and physical limits—most of the newly available LNG is already contractually committed to buyers globally, not just the EU. Remember, these are private companies, Trump can’t over-ride current contracts or prices (yet?). Redirection and ramp-up challenges: Achieving these export levels would require not just diversion of nearly all available US oil and LNG exports away from other global partners, but also massive and immediate infrastructure upgrades—something not possible within a three-year window. Industry and expert consensus is that the $250 billion/year target is not realistic. Analysts warn that it “exceeds market realities,” requiring either all US oil exports to be exclusively shipped to the EU, or the value of LNG imports to increase sixfold, both logistically and commercially unfeasible. The 15% US tariff covers around 70% of EU exports, especially vehicles, pharmaceuticals, and semiconductors. US tariffs on steel, aluminium, and copper from the EU remain at 50%. Both sides plan to use a quota system on these materials, but details remain uncertain. Certain “strategic products” will be excluded from tariffs (zero-for-zero arrangements), with the intent to expand this list.  Aluminium This has been one of Trump’s major Hobby Horses when it comes to tariffs, in his efforts to return the USA to the industrial age. Primary Aluminium Production: In 2025, U.S. primary aluminium smelters are operating at just over half their effective capacity, after years of facility shutdowns. The estimated annual primary production is around 900,000–1 million metric tons—down sharply from historical levels. The industry has only 6 smelters remaining, with some running at reduced output. Secondary (Recycled) Aluminium Production is an interesting component: U.S. production of recycled (secondary) aluminium is much higher, approximately 3.3–4 million metric tons per year. This recycled material is critical to meeting domestic needs and now accounts for over 80% of all U.S. aluminium production. Combining both primary and secondary output, total U.S. aluminium production is over 4 million metric tons annually, with the vast bulk coming from recycling rather than new smelting. National Consumption: U.S. aluminium demand is significantly higher than production, estimated at about 12 million metric tons per year in 2024–2025, and still growing. Consumption is driven by the transportation, packaging, and construction sectors, with demand for aluminium in vehicles and energy infrastructure especially strong. This means the U.S. supplies less than 40% of its total aluminium needs from domestic production (primary plus recycled) and must import the rest, generally over 7–8 million metric tons annually, including both primary metal and semi-finished or finished products. Most imports come from Canada and South America. Greenfield smelters take around 3 years to bring online, 2 years at the absolute minimum, so by the time these smelters come online, Trump’s term will be history. The inflation from this product alone will be found right across almost every industry and product category, from soft drinks, pharmaceuticals, sports equipment, cars and planes, communications, building materials and hundreds of thousands of others. We’re already seeing some of those increases filter through: The price of aluminium in the US post tariffs jumped from $520 a ton to $900 a ton (it’s a free market – did the Donald think that local smelters wouldn’t at least match the new tariff price?). The prices passed on range from 3-15%.  (Source: DJT’s Truth Social Account) Let’s look at something we can all relate to – a can of ‘cold drink’, as we Saffers call it. The chart speaks for itself.  Author: Dawn Ridler  More Earnings. The earnings continue to roll in, and there is certainly good news. Tech companies again delivered on superior expectations and, for the most part, led the market charge higher. Microsoft, which in the month is up 9% and over 5% on the day after earnings, is one such company in point. They now boast over 100 million users of Co-Pilot. In my opinion, Co-Pilot isn’t of the best quality yet, but despite this, it can lean heavily on Microsoft’s enterprise software clients to gain users. The Azure product had a 34% y-o-y growth. They now add as much capacity in a month as they did in the first 5 years of their existence. In the pipeline is Azure Foundry, which will become the app server offering tooling, management and controls to create trustworthy AI. Ultimately, Revenue was up 18% in Q4, and net income increased by 24%. In the same vein, Meta released stellar results, sending their stock up by 12% post earnings and 8% for the month. Revenue grew by 22% and earnings by 38%!. Ad impressions increased by 11% for the quarter and all of this was achieved with headcount reducing from the previous quarter. This, in many ways, is what is driving the market at present. Ironically, the companies which is driving the AI revolution may also long-term be responsible for job losses unless one becomes innovative. Microsoft last week released a list of jobs which are most likely to be impacted and those they believe probably won’t be affected.:  Those jobs that require head knowledge seem to be most at risk. Some of them actually require a higher degree to enter the job market. Look at maths as an example. If you happen to be great at maths and were hoping to do a degree in pure maths, you are probably better off considering a degree in which you could apply maths in the pursuit of a product or service. A branch of engineering which requires creativity, perhaps? On a more humorous note, broadcast announcers and DJs seem to have a problem. Are the days of celebrity DJs over? Perhaps they could consider a second career as an embalmer, which seems to be a job which AI will battle to take over. Ditto with a dishwasher and roofer, it seems. On the other side of the scale is the big pharma company Novo Nordisk, which offered the market a horrible set of outlook numbers. This stock has been trading weak for a long time now, offering value on almost every metric you can think of. This didn’t stop the stock from ending the month 30% lower after it guided that its 2025 outlook will now have to contend with sales growth between 8-14% whereas this previously was 13-21%. The maker of Ozempic and Wegovy is not only facing competition for their weight loss drugs, but also needs to make a decision whether they will fight infringement of their patents. They are selling Wegovy for weight loss in the US, but the FDA ruled that due to a shortage in the drug, competitors may provide similar products. This was a strategic mistake for the company. Tele-health company Him&Hers has been selling a similar product through their sales channels to great effect, and the question remains if Novo Nordisk will protect their IP. They could decide to sue in the US courts. Health care in general seems to have suffered in the quarter, but ironically also offers some of the best value opportunities. And that ultimately is what makes a market. Author – Cobie Le Grange EXCHANGE RATES:  The Rand/Dollar closed at R18.15 (R17.76, R17.72, R17.90, R17.58, R17.89, R17.99, R17.92, R17.77, R17.95, R17.88, R18.04, R18.16, R18.39, R18.64, R18.89, R19.12, R19.10, R18.36, R18.21, R18.18, R18.20, R18.71, R18.35, R18.38, R18.41, R18,67, R18.38, R18.73, R18.03, R18.05, R18.11, R18.21,)  The Rand/Pound closed at R24.09 (R23.88, R23.76, R24.22, R24.08, R24.49, R24.22, R24.35, R24.05, R24.18, R24.14, R23.95, R24.16, R24.40, R24.82, R25.10, R25.01, R24.73, R23.78, R23.55, R23.52, R23.50, R23.53, R23.19, R23.12, R22.85, R23,16, R22.93, R22.80, R22.99, R22.98, R22.72, R22.99, R22.73, )  The Rand/Euro closed the week at R21.04 (R20.86, R20.61, R20.93, R 20.70, R20.91, R20.74, R20.68, R20.24, R20,37, R20.27, R20.13, R20.43, R20.78, R21.21, R21.52, R21.72, R20.93, R19.95, R19.72, R19.83, R19.72, R19.41, R19.20, R19.29, R19.02, R19,35, R19.31, R19.23, R19.09, R18.87, R19.19, R18.85, ,)  Brent Crude: Closed the week $69.46 ($68.29, $69.21, $70.58, $68.27, $67.39, $77.27, $74.38, $66.56, $62.61, $65.41, $63.88, $61.29, $65.86, $67.72 $64.76, $65.95, $72.40, $72.13, $70.51, $70.33, $73.03, $74.23, $74.51, $74.65, $76,40, $77.60, $79.98, $71.00, $72.38, $75.05, $70.87, $73.86, $73.99).  Bitcoin closed at $113,608 ($118,139, $118,214, $117,871, $108,056, $107,461, $103,455, $105,017, $105,643, $104,049, $103,551, $104,615, $96,405, $94,185, $84,571, $84,695, $82,661, $83,074, $84,889, $82,639, $83,710, $85,696, $96,151, $96,821, $96,286, $99,049, $104,559, $104,971, $99,341, $97,113, $97,950, ). Articles and Blogs: Difficult Financial Conversations NEW Kick Start your own Retirement Plan NEW You matter more than your kids – in retirement To catch a falling knife Income at retirement 2025 Budget Apportioning blame for your financial state Tempering fear and greed New Year’s resolutions over? Try a Wealth Bingo Card instead. Wills and Estate Planning (comprehensive 3 in one post) Pre-retirement – The make-or-break moments Some unconventional thoughts on wealth and risk management Wealth creation is a balancing act over time Wealth traps waiting for unsuspecting entrepreneurs Two Pot pension system demystified Keeping your legacy shining bright Financial well-being when dealing with Dementia and Alzheimers Weathering the storm Pruning your wealth farm Should you change your investments with changing politics? Taking a holistic view of your wealth Why do I need a financial advisor? Costs Fees and Commissions The NHI and what to do about it New-Normal for Retirement? Locking-In Interest rates – The inflation story Situs – The Myths and Reality Tax Residency – New Rules new headaches Are retirement annuities dead A new look at retirement Offshore investing – an unpopular opinion Cobie Legrange and Dawn Ridler, Rexsolom Invest, Licensed FSP 45521. Email: cobie@rexsolom.co.za, dawn@rexsolom.co.za Website: rexsolom.co.za, wealthecology.co.za |