When Donald Trump returned to the White House in January 2025, no one could have imagined what was to come. From imposing the highest tariff rates in a century to orchestrating mass deportations and engineering the longest government shutdown on record, Trump’s leadership upended the post-war world order. (And recent events in Venezuela suggest that 2026 will be no less volatile.)
But instead of derailing financial markets, which would typically be caught off guard by such seismic political and economic policy decisions, it led to a year of headline-driven volatility, yet a seemingly unstoppable market rally.
South African investors benefited handsomely, with the All Share Index ending the year 38% higher – well ahead of the S&P 500, which rose 16% in its third consecutive year of double-digit gains.
The disconnect between politics and performance
When investors look back at the market’s performance in the years ahead, they will have little sense of the profound changes the world endured in 2025.
Tariffs put a definitive end to the US’s participation in a free-trade world, with the Trump administration increasing the average US tariff rate to around 17% from below 3% at the end of 2024. While the announcement saw markets tank on so-called Liberation Day, the expected negative effects on inflation and unemployment didn’t materialise to the extent predicted.
Tariff impacts manifested in less apparent ways, including hiring freezes, delayed capital expenditures, and bouts of volatility, rather than causing an outright economic collapse.
The US unemployment rate crept up from 4% to 4.6% by year-end. While the inflation spike many feared from tariffs never materialised in 2025, core inflation still hovers around 3% – a percentage point above the US Federal Reserve Bank’s target range.
South Africa’s surprising outperformance
South Africa’s market performance in a year also marked by domestic political tensions was a surprise. In addition to the sharp rally in equities, the rand strengthened 12% against the dollar, posting its best annual performance in over a decade. Government bond yields fell some 70 basis points to 8.21% as investor confidence improved.
Trump’s direct impact on South African markets was limited to isolated episodes. When the administration suspended US Aid in February, local markets slipped briefly. April’s tariff announcements targeting South African exports triggered a sharp selloff. However, these proved temporary disruptions in a year in which SA’s fiscal position improved, commodity prices strengthened, and S&P upgraded the country’s sovereign credit rating in November.
What 2026 may bring
For investors, the lesson from 2025 is that maintaining diversified exposure across geographies and asset classes while focusing on long-term fundamentals rather than political noise will remain the most prudent approach in 2026. Especially as US midterm-election-year volatility looms and investors come to grips with the full extent of the Trump administration’s imperialist ambitions – Venezuela being a case in point.
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