 Your summary with links, if you’d like to pick and choose Debt Stabilisation: The 2025 Medium-Term Budget Policy Statement (MTBPS) offered cautious optimism with government debt expected to stabilise at 77.9% of GDP—the first stable outlook since 2008. The budget deficit should narrow to 2.9% by FY27/28. US Market Caution: The Nasdaq fell by ~2.3%, S&P 500 and DJIA by ~1.7%, as nervousness about AI valuations and “data fog” following a lengthy US government shutdown delayed key releases. Fed rate cut expectations for December now sit at roughly a coin toss. Russell 2000 Volatility: With big tech under pressure, risky bets via options are surging in smaller US stocks, paradoxically favouring companies with weaker balance sheets, suggesting significant market froth and risk appetite. Government Shutdown: The US government has reopened after a record shutdown, but economic data delays linger. The shutdown’s impact has reverberated through air travel, food aid, and farm subsidies. Soybean Trade War: China sharply reduced US soybean imports amid ongoing trade tensions, impacting Midwest farmers and shifting demand toward Brazil. Some partial recovery is possible if new purchase commitments materialise, but US market share remains under threat long-term. Oil: Brent crude steadied at the low 60s after a 4% drop on confirmation of a global oil surplus. OPEC supply growth, US production increases, and shifting geopolitical dynamics are keeping prices subdued and capping energy inflation. Emerging Market Rally: Weakness in the US dollar, driven in part by “America First” policies, continues to support emerging-market (EM) assets, with outperformance noted relative to developed peers. Still, the rally’s future is tied to highly uncertain global tech and trade dynamics. Global Economic Roundup in the last week South Africa (RSA) South Africa’s fiscal terrain is undergoing a subtle but important shift. The 2025 Medium‑Term Budget Policy Statement (MTBPS) revealed that government debt is expected to stabilise at around 77.9 % of GDP this year, the first time since the 2008 crisis that the debt-to-GDP ratio is not expected to grow further. At the same time, the inflation target has been reduced from 4.5% to 3% (with a ±1% tolerance band) — a strong signal that the authorities are seeking greater credibility & lower long-term borrowing costs. However, growth remains stubbornly weak. The MTBPS revised South Africa’s 2025 growth forecast down to around 1.2% as headwinds persist (logistics, investment, structural problems), even as revenues came in ahead of estimates. In currency & markets, the local environment is showing tentative optimism: the move to a 3% target boosted the rand ~0.7% and local bonds and equities got a mild lift. But risk remains: if global rates remain high, commodity prices soften or investor confidence falters, South Africa remains exposed. |
USA
Global ex-USA
South Africa’s 2025 Medium-Term Budget Policy Statement (MTBPS), delivered by Finance Minister Enoch Godongwana on 12 November 2025, signalled cautious fiscal stability and incremental progress toward better public finances and economic reform.
Debt and Deficit: Treasury now expects debt to stabilise at 77.9% of GDP by FY25/FY26, slightly better than earlier projections. The consolidated budget deficit should narrow from 4.7% of GDP to 2.9% by FY27/FY28.
Revenue: Upward revision of R19.7bn in expected revenue for this year, driven by resilient consumer spending, corporate tax contributions, and improved collection by SARS. However, the medium-term revenue outlook is subdued as inflation and nominal growth soften.
Expenditure: Spending revised R36bn lower over the medium term due to lower inflation and departmental underspending. Additional resources will be allocated to infrastructure, disaster recovery, and capital injections for new investment vehicles.
Inflation Target: Announced a new official inflation target of 3%, with a 1% tolerance band, representing closer alignment between monetary and fiscal policy. This is expected to support lower borrowing costs and sustained fiscal credibility.
Infrastructure and Reform: Infrastructure remains a top priority, with capital payments projected to grow by 7.3% over the medium term. R54bn is set aside for municipal infrastructure and unlocking private investment. Progress on logistical and power sector reform is also cited as positive.
Support Measures: Social grants will increase from April 2025 (e.g. old age and disability grants +R130), and targeted measures introduced to shield poorer households from rising costs.
VAT Update: VAT is set to rise 0.5% in each of the next two years to 16%, as part of the revenue drive to help close the fiscal gap. This is going to continue to be resisted by the GNU
Market Reaction: Steps to reduce bond issuance, strengthen discipline, and coordinate fiscal decisions have been well received by financial markets and credit rating agencies. Fiscal consolidation and a stronger rand are expected to ease monetary policy pressures into 2026.
South Africa is one of the emerging markets that has benefited from the sustained appeal of emerging market assets since the turn of the year, and it has more to do with Trump’s “America First” philosophy than anything else.
The administration wants a weaker dollar, and it tends to get what it wants, and a declining greenback helps the emerging world. That ideological shift has unfolded as a steady recalibration, not an abrupt change of course, despite the chaos over the pond. The intriguing question now is whether it prefigures a broader sea-change.
The DXY Index
As encouraging as the equity gains may be, history offers some perspective. Dating back to the early 2000s, past cycles suggest they still have a long way to go before reclaiming their former glory.
The current EM rally is the most convincing since the splurge of optimism about China in the immediate aftermath of the pandemic’s first wave in 2020. That dissipated as Covid disruptions dragged on and investors lost patience with Xi Jinping’s crackdown on the private sector. If there’s a way to gauge whether the latest burst of optimism can be more sustained, it starts with understanding what drove earlier upswings and how powerful those forces proved.
One element, as ever, is the weaker dollar, which boosts local-currency returns, eases any problems funding dollar-denominated debt, and lifts sentiment across developing economies.
The trend looks as though it might have turned. JPMorgan’s index of EM currencies against the dollar, the most widely used benchmark, troughed at the turn of the year and has stayed above its 200-day moving average throughout months of uncertainty. Forex traders watch such technical trends closely, and this will bolster other EM assets if it holds:
The rolling 100-day price returns since 2010 shows emerging markets outperforming their developed peers by more than two standard deviations. That is statistically significant.
This has happened on only six occasions in the last 15 years; it underscores the significance of the push into EMs, rather than Europe and Japan, as a primary alternative to the US. They might just be the greatest market beneficiaries from Trump 2.0. While outperformance might just persevere after breaking out like this, history suggests that it will be by a much smaller margin – and it will be in the tech space, which the JSE doesn’t have, except for the Naspers/Prosus exposure.
To be overweight in the emerging markets — home of the likes of Huawei, Xiaomi and TSMC — rather than EAFE is to be overweight in tech, just like the USA. It also involves being heavily exposed to China and Taiwan. This shows us that Beijing’s sparring with Washington still threatens to disrupt the tech sector. Even amid the fragile calm of the latest trade truce, it suggests that investors might be taking rather more of a geopolitical risk than they realise.
This revival could be thwarted if the tech bubble bursts or the AI buildout doesn’t go as planned, in which case investors all over the world are going to be crying into their soup.
The key to the real question of whether EM is at last at the beginning of a sustained up-cycle depends on whether the ongoing US “de-risking” from China amounts to a sustainable strategy. The rebalancing has been going on for years.
Let’s look at a scenario for fun… Say confidence in US assets wanes into the 2030s as Treasury debt surpasses 180% of gross domestic product and repeated political interference with the Fed, eats away at its credibility. Investor trust erodes, capital flows reverse, risk premia rise, and the dollar weakens by around 20%, with the US losing the “exorbitant privilege” that comes with the reserve currency.
On the other hand, say China pursues successful reforms, loosening capital controls and improving transparency. A better pension system reduces the need for precautionary savings, and the personal savings-to-disposable-income ratio falls to around 10% by 2060. Domestic consumption is 14% higher than the baseline in real terms by 2060, aligning China with advanced economies.
Does that sound far-fetched? Then it’s worth remembering that not long ago, China was broadly dismissed as “uninvestable.”
There’s nothing to indicate that a wholesale rebalancing of the global financial system is imminent — but a steady continuation of the trend is not out of the question.
The average stock, in other words, outside of big tech, has barely improved this year. This possibly means that the investment in AI is displacing funds that would otherwise have flowed elsewhere. Or it might point to incurious buying of the index, which will tend to stoke the concentration that already exists. The Russel 2000, below, is up less than 2% yoy.
I came across one interesting anecdote which is probably replicated thousands of times across the world in the last year..
I asked a broker [at one of the biggest US retail firms] two days ago where I could find the holdings for GDX, a gold miners ETF. He commented that it had probably been at least a year since anybody had asked him for the holdings for any ETF.
At the other end of the spectrum, those not just sinking money passively into large caps are speculating using options on single small-cap stocks. Volume in options tied to the Russell 2000 has gone through the roof this year.
This is odd because a lot of companies in the Russell 2000 don’t earn a profit, so betting on them is all the riskier.
The stocks attracting the most options activity are those that are already the most volatile, making any such investment potentially lucrative but also very risky. Every sign that ‘greed’ is in full spate and retail and day-traders are ‘busy’. (A clear sign of an ‘over-exuberant’ market). Interestingly, Russell 2000 companies with relatively poor balance sheets (of which there are many) are outperforming stronger companies.
It’s hard to see behaviour like this as the result of a careful balancing of risks, or an attempt to channel capital where it can be most productive.
Both passive investing in big companies and active investment in smaller stocks prove, on closer examination, to be indiscriminate and unduly risky. This is only sustainable while the rally lasts.
US lawmakers reopened the government on Wednesday after a record 43-day shutdown that snarled air travel, delayed food aid and forced federal workers to go without pay.
Wall Street traders drove most stocks higher on the news, which may unlock access to economic data key in shaping the Federal Reserve’s outlook. Still, some closely watched October inflation and jobs figures probably won’t be released at all, the White House said.
The fallout for the Democratic Party is still to be determined. Chuck Schumer (Senate Minority Leader) tried to keep his hands clean, but his fingerprints were all over the choice of the 8 breakaway Democratic senators. None of them will be on the ballot in the midterms! Come January, millions of Americans are going to find that their Medical Aid (ACA)premiums have doubled, or more, but at least food stamps will resume in time for Thanksgiving I suppose.
This is only kicking the can down the road until end of Jan, when they could go through all of this again – perhaps there will be more of an appetite for the Dems to tough it out once the holidays are out of the way. It also brings the potential pain right into the campaigning season for the midterms…
Air travel, which was hit particularly hard by the shutdown, is poised for some relief. The US government aims to start lifting flight reductions at major airports across the country within a week of the shutdown ending, as long as the safety data supports the decision. But it may be too little, too late for airlines. Delta, for example, said the mandated flight cuts have already caused a significant financial impact.
Soybeans have been a flashpoint in the trade war between the US and China, the world’s largest importer of the oilseed. To begin the new harvest season, the East Asian nation boycotted American soybeans. After a flurry of orders from China in late October – which coincided with a larger trade agreement brokered by the two countries, China’s purchases of US soybeans again stalled.
The downturn in buying has been costly for US growers, who depend on China to buy a big share of their crop. China has instead pivoted more toward South American producers, such as Brazil and Argentina.
There could be some relief on the way for US farmers, who are facing overflowing storage bins and flat prices. Washington said Beijing pledged to buy 12 million tons of soybeans by the end of this year, followed by 25 million tons annually over the next three years.
China has yet to confirm the specific purchase commitments mentioned by Trump’s team, but Beijing has reduced tariffs on American soybeans.
Why did China cut back on US soybean purchases?
Soybeans are essential to China’s food system. The bulk of its imports is crushed into soymeal for animal feed for pigs, which supply most of the nation’s meat, and other livestock. Soy oil is also widely used for cooking and food products.
US growers are typically the second-largest supplier of soybeans to China, accounting for a fifth of its imports last year. China has used that relationship as leverage in the wider trade dispute, squeezing the American farmers who form a key voting bloc for President Donald Trump and the Republican Party.
It halted its purchases of US soybeans in May in response to Trump’s tariffs on Chinese goods, and for almost two months after the new marketing year kicked off in September, it refrained from booking any US cargoes for the current harvest. Trump accused China of holding off on purchases “for ‘negotiating’ reasons only” and called the move “an Economically Hostile Act.”
Note: Marketing year runs from Sept. 1 to Aug. 31. Data hasn’t been updated since Sept. 18, 2025, due to the US government shutdown.
This isn’t the first time that China slashed its imports of US soybeans. It also did this during the 2018–2019 trade war, to counter American tariffs and restrictions that Trump introduced in his first term in office. It was at this point that China started to diversify its supply, favouring South America, specifically.
That pressure helped push the first Trump administration to agree to the so-called Phase One deal. Under that agreement, China pledged to buy tens of billions of dollars’ worth of US farm goods, including soybeans, in exchange for tariff relief. Trump later blamed his successor, President Joe Biden, for not adequately enforcing the pact.
The fallout has been significant. Soybeans are the US’s biggest agricultural export, and China is the top destination, accounting for more than half of the $24.5 billion of the crop American farmers sold last year. Without that market, US growers were left with fewer buyers and weaker prices.
Across the US Midwest, farmers have watched silos fill up as harvests roll in. Researchers at Purdue University warned that higher costs for fertiliser, seed, and chemicals — combined with falling soybean prices — are squeezing profits. Many growers have chosen to store their crops rather than sell at steep losses.
The pain has rippled across the industry. Grain elevators, where the oilseed is stored before being loaded on ships for export, processors and the railroads that move soybeans across the country have all been affected by the slowdown.
Trump had said his administration would use funds collected from tariffs to provide relief for farmers. However, administration officials say the aid can’t be released until the government reopens and funding is approved.
Many analysts estimated that China would end up importing around 12 million tons of American soybeans in the current marketing year ending in August. This volume is less than half the 27 million tons of oilseed China purchased from the US in the last season. Chinese crushers, pig farmers and feed producers have little need for additional soybeans right now as they’ve built up higher-than-usual inventories, while government reserves have provided a further cushion.
China’s demand for US cargoes could return to more normal levels in the future, if it meets the 25-million-ton threshold, Bessent said had been agreed. However, that would still be lower than the outcome of the trade deal struck during Trump’s first term. After the Phase One pact was signed, US soybean shipments to China rebounded to 34.2 million in the 2020-21 season.
China has since diversified its pool of suppliers to ensure it never again significantly depends on its main geopolitical rival for a crop vital to food security and economic stability. Brazil, the world’s top grower, has been a major beneficiary of that pivot and has been rapidly expanding its output.
Brazil as the alternative Soy producer
Come January, American farmers will face tough competition to secure Chinese buyers as Brazil is expected to flood the market with another record harvest. A heavier reliance on Brazil does bring its own risks for China in the form of higher costs and greater exposure to weather shocks in South America.
I wondered why the costs are higher…
Recently, Brazil’s direct input costs—especially fertilisers, which they largely import—have increased more rapidly than in the US.
Brazil’s tropical climate and pest pressure drive higher pesticide use and costs compared to Midwest US farms.
While seed costs are cheaper in Brazil, inputs like fertilisers and chemicals can offset those savings in certain years.
Brazilian farmers are paid in Brazilian real, but soybeans are traded in US dollars. If the real strengthens, local costs rise and push up the dollar price of soybeans. If the real weakens, Brazil’s soybeans are cheaper on the world market, but input costs in dollars (like imported fertiliser) rise.
Historically, Brazil had higher transportation costs due to poor infrastructure. Although this has improved, it can still add to costs, particularly for soybeans grown in the interior that must travel long distances to ports.
Oil steadied after a 4% tumble on signs global glut has arrived…
Oil steadied after slumping on Wednesday on signs that a long-awaited surplus has finally arrived, with traders braced for a fresh market assessment from the International Energy Agency.
Global benchmark Brent held above $62 a barrel after losing almost 4% in the previous session, while West Texas Intermediate was near $58. Producer group OPEC — which has been restoring idled capacity this year — said in its latest market snapshot that global supply had topped demand in the third quarter, flipping its earlier estimate for the period from a shortfall.
Elsewhere, a key indicator — WTI’s prompt spread — sank into contango, a pricing pattern that signals ample near-term supplies, and the US Energy Information Administration raised its US production forecast for next year. (Contango is a market condition where the price of a commodity’s futures contract is higher than its current spot price.)
Crude has retreated this year on widespread expectations for a glut, with the IEA already predicting there will be a record surplus in 2026. The slump has been driven by rising supplies from OPEC and its allies, including Russia, as well as production increases from drillers outside the alliance. Brent capped a third monthly loss in a row in October and has lost ground so far in November.
Lower crude prices — if sustained — stand to bring down products such as gasoline, reducing inflationary pressures in a plus for central bankers such as the Federal Reserve, as well as for consumers. That may also stand as a win for US President Donald Trump, who has championed cheaper energy (but it has not come from US “drill-baby-drill”).
In recent weeks, the Trump administration has also moved to raise the pressure on Russia to end the war in Ukraine, in part by sanctioning Rosneft PJSC and Lukoil PJSC. That, coupled with Ukraine attacks against Moscow’s energy infrastructure, has helped to support product prices.
At the moment, it’s a seesaw battle between Russia’s (about 10% of global production) risk premium and ample supply. Sentiment may shift again, as the market continues to calibrate the disruption from sanctions.
This year’s surge in OPEC+ supply has been driven by alliance leader Saudi Arabia, although members have signalled they will pause further hikes in the first quarter of 2026. Ahead of that, Saudi Arabia’s Crown Prince Mohammed bin Salman is set to meet President Trump at the White House next week.
Even with the OPEC+ halt to hikes in production in the coming quarter, there’ll still be a surplus of 3.82 million barrels a day in that period, up from 2.89 million in the final quarter of this year.
| Checking in on the US and UK central banks: After a breathtaking rally since April, markets have endured a tumultuous few weeks as traders contended with a data blackout and mounting concern over lofty tech valuations. Investors are now bracing for further volatility as the government resumes releasing economic figures, with markets not yet settled on the Federal Reserve’s next steps. Money markets now see about even odds of a Federal Reserve cut next month, after wagers swung in the past week as traders weighed signals about a weakening labour market and fragile consumer sentiment against lingering inflation concerns… There will be some caution around upcoming employment and inflation releases (when we finally start to get them again), particularly as we approach the Fed meeting that Powell has encouraged markets to treat with care. In the UK, economic growth almost ground to a halt in the third quarter amid fear of looming tax hikes in the Labour government’s upcoming budget (backtracked on Thursday last week). The pound dipped against the dollar after the data, but the move reversed as the US currency fell more broadly. Gilts were broadly steady. |
| Author: Dawn Ridler |
South African retirees are quick to point out that their personal inflation rate is different to the official number printed by Stats SA. This is easy to understand, seeing that the basket of goods used by Stats SA could be markedly different from your own basket. Also consider that the cost of inflation becomes much more important for retirees as they want to make sure that their capital keeps track in real terms. So, the number is important, but in many cases needs to be viewed not in isolation but in relation to other factors as well.
The previous target of 3-6% wasn’t a bad idea. It allowed for a wide range which the SARB could manage the monetary framework of an emerging market such as South Africa against. EMs are known for their more volatile economies and currencies, and all of this ultimately influences inflation. Look at the chart below detailing the movement of South African inflation over time:
The 3-6% band seems to capture the majority of the data points quite well (indicated by the dark blue horizontal lines). As inflation creeps up, the SARB would adjust the Repo rate higher to compensate investors for the “economic drag” from inflation and visa versa.
Investors will always make investment decisions based on what they could earn risk-free first. If this rate is high, it would generally force outflows from equities. This in turn forces the valuations for equities lower, which in turn makes them attractive again … in relation to what can be earned from cash. This is a normal market dynamic.
The SARB has now adopted a 3% inflation target, allowing for a 1% band around the target (indicated in orange on the graph). The target has not only been reduced but the margin of acceptable deviation has also been narrowed. People are cheering the lower target and how this will help the economy, but in reality, it’s going to do very little to your actual inflation rate. So why do this?
This must be a politically expedient choice. If one can show that one hopes to keep inflation lower and hence interest rates, this will help those who have incurred debt and make for a friendlier approach to the middle class in South Africa. One can’t argue that lower interest rates will help the average South African. But there is probably a lot more to the story than that. If you look at the graph, and if history repeats itself, then there is going to be very little chance that the SARB will deliver on their 3% target. Sure, CPI inflation is now expected at 3.5% y/y for 2025/26, down from May’s projection of 4.1% y/y, but for how long will inflation last here? The US is readily trying to weaken their Dollar and given that most trade flows globally occur in Dollars, it is conceivable that ZAR weakness may not play the same significant inflationary role it did in the past. So that is good news. But what if continuous Dollar weakness starts causing US inflation to rise. It might not happen now, but there is a distinct chance of that in the future. This could influence our inflation rate as currencies adjust and as the general cost of goods rises globally. This then throws cold water on having a 3% inflation target. If South Africa showed a lot more development to date with higher GDP records and lower unemployment numbers, one could argue that South Africa has matured and that this could enter a new inflation regime. The opposite, though, has happened.
The question everyone should be asking now is how this will influence interest rates.
If an acceptable inflation rate materialises (2-4%), which one could probably massage by changing the basket constituents, this will keep interest rates low. But at the same token, capital will leave money markets in the search for more attractive returns either in local equities or offshore.
This does not only apply to South African investors but also global investors who look at our rates in relation to what can be earned globally. So the bigger question is what does South Africa’s fixed income market provide to world investors that makes them keep investing?
It must be the fixed income liquidity and yields on offer for our given risk rating. That yield will now surely change for the worse.
Author: Cobie leGrange
EXCHANGE RATES:
The Rand/Dollar closed at R17.13 (R17.27, R17.31, R17.25, R17.38, R17.50, R17.22 , R17.35, R17.33, R17.37, R17.58, R17.65, R17.44, R17.61, R17.74, R18.15,R17.76, R17.72, R17.90, R17.58, R17.89, R17.99, R17.92, R17.77, R17.95, R17.88, )
The Rand/Pound closed at R22.56 (R22.69, R22.76, R22.96, R23.34, R23.37, R23.19, R23.22, R23.35, R23.55, R23.73, R23.84, R23.53, R23.84, R23.84, R24.09, R23.88, R23.76, R24.22, R24.08, R24.49, R24.22, R24.35, R24.05, R24.18)
The Rand/Euro closed the week at R19.96 (R19.98, R20.02, R20.06, R20.26, R20.33, R 20.22, R20.30, R20.35, R20.38, R20.61, R20.62, R20.44, R20.56, R20.64, R21.04, R20.86, R20.61, R20.93, R 20.70, R20.91, R20.74, R20.68, R20.24, R20,37)
Brent Crude: Closed the week $63.94 ($63.61, $64.66, $65.04, $61.27, $62.14, $64.28, $69.67, $66.57, $66.80, $65.52, $67.38, $67.73, $66.08, $66.07, $69.46, $68.29, $69.21, $70.58, $68.27, $67.39, $77.27, $74.38, $66.56, $62.61, $65.41)
Bitcoin closed at $94,990 ($101,562, $109.936, $112,492, $106,849, $111,888, $124,858, $109,446, $115,838, $115,770, $110,752, $108,923, $114,916, $117,371, $118,043, $113,608, $118,139, $118,214, $117,871, $108,056, $107,461, $103,455)
Articles and Blogs:
Medical Risk Mitigation NEW
Next Year is going to be different – Consolidation NEW
Abdication or diversification?
Carbo-loading your retirement
Spoiled for choice
Who needs a plan anyway
8 questions you need to ask about retirement
What to do when interest rates drop
How to survive volatility in your investments
What to do when interest rates drop
Difficult Financial Conversations
Financial Implications of Longevity
Kick Start Your Own Retirement Plan
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
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