Trump’s tariff talk is toying with global currencies, with the rand surprisingly resilient (for now). Inflation’s back on the menu, this time with a side of geo-economic risks while the US economy just keeps on trucking. AI spending trends and eased US tobacco regulations are the headlines for those looking for strong investment themes.
Tariff talk
As the Trump administration slowly reveals its tariff agenda, staggered country-specific announcements could create opportunities for currency traders. As the self-proclaimed “tariff man” has held back on swiftly imposing tariffs across the board, non-US dollar (USD) currencies have rallied, with the South African rand (ZAR) performing well. However, big announcements are coming, with Trump indicating that he wants to implement across-the-board tariffs that are “much bigger” than the 2.5% suggested by Treasury Secretary Scott Bessent. Major tariff targets include foreign chips, pharmaceuticals and metals “in the very near future.” Any move in the US’s favour would boost the USD.
Inflation risks remain
In its January 2025 World Economic Outlook report, the IMF painted a picture of inflation before and after COVID-19. The main takeaway is that inflation remains a real risk as the current drivers are fundamentally different to those experienced in 2022 and 2023. Fuelled then by supply-side shocks from the pandemic and Russia’s invasion of Ukraine, inflation today is associated with geopolitical tensions and protectionism, which have led to geo-economic risks, including trade sanctions and investment screening. Volatile food prices due to climate change and disruptions in major shipping routes that impact global shipping costs compound the issue. As such, the potential for another wave of inflation could be more pronounced than in previous cycles.
US economy keeps rolling
As the reporting cycle gathers pace, we’ve had a strong start to the US earnings season. Bank stocks enjoyed a big post-election pickup in consumer and corporate confidence that will likely fuel growth. There is a lot of data available to suggest this consumer strength will continue, with spending power likely to go from strength to strength. The overall message right now is that the “US tank” will likely keep rolling.
No slowdown in AI spend
Meta (META-NASQ) plans to keep spending big on AI, which will see capex rise from $50 billion to $60-65 billion, likely driven by President Trump’s Project Stargate ambitions. This announcement comes at a time when analysts expected a peak in this capex cycle, with companies looking to reign in their chip and data centre spend. Should this theme play out across other AI players, chip makers and infrastructure providers could sustain those gains. In related news, Nvidia (NVDA-NASQ) edged up after losing $589 billion of its value in Monday’s DeepSeek AI market rout after stating that “excellent” advancements still require lots of its chips.
Tobacco’s Trump card
The Trump administration withdrew the menthol cigarette ban, which is a helpful development for British American Tobacco (BATSL-TRQX). The company also stands to benefit from other potential tailwinds, like lower US taxes and Trump aggressively addressing Chinese disposable vapes, which would boost the approved vape industry, of which BAT is by far the market leader. The stock was trading at a near 2-year high in British pounds and slightly below its recent September 2024 peak in US dollars following the news.
TFG sales fizzle out
Foschini Group (TFG-JSE) released a disappointing sales update, which sent the stock down -3.75% as local sales lost serious momentum in November and December last year, falling to low-single-digit levels. The good news is that margins look to be expanding nicely.
Stock focus: American Express
American Express (AXP-NASQ) reported record revenues of $65.9 billion, which was up 10% year-on-year. The Millennial and Gen Z client segments, where Amex really resonates, are driving this growth, which bodes well for the future. Travel and entertainment (+11%) was the fastest-growing spending category, with airline spending rising +13% and first-class airfares up +19%.
Trading update : 31 January 2025
Trump’s tariff talk is toying with global currencies, with the rand surprisingly resilient (for now). Inflation’s back on the menu, this time with a side of geo-economic risks while the US economy just keeps on trucking. AI spending trends and eased US tobacco regulations are the headlines for those looking for strong investment themes.
Tariff talk
As the Trump administration slowly reveals its tariff agenda, staggered country-specific announcements could create opportunities for currency traders. As the self-proclaimed “tariff man” has held back on swiftly imposing tariffs across the board, non-US dollar (USD) currencies have rallied, with the South African rand (ZAR) performing well. However, big announcements are coming, with Trump indicating that he wants to implement across-the-board tariffs that are “much bigger” than the 2.5% suggested by Treasury Secretary Scott Bessent. Major tariff targets include foreign chips, pharmaceuticals and metals “in the very near future.” Any move in the US’s favour would boost the USD.
Inflation risks remain
In its January 2025 World Economic Outlook report, the IMF painted a picture of inflation before and after COVID-19. The main takeaway is that inflation remains a real risk as the current drivers are fundamentally different to those experienced in 2022 and 2023. Fuelled then by supply-side shocks from the pandemic and Russia’s invasion of Ukraine, inflation today is associated with geopolitical tensions and protectionism, which have led to geo-economic risks, including trade sanctions and investment screening. Volatile food prices due to climate change and disruptions in major shipping routes that impact global shipping costs compound the issue. As such, the potential for another wave of inflation could be more pronounced than in previous cycles.
US economy keeps rolling
As the reporting cycle gathers pace, we’ve had a strong start to the US earnings season. Bank stocks enjoyed a big post-election pickup in consumer and corporate confidence that will likely fuel growth. There is a lot of data available to suggest this consumer strength will continue, with spending power likely to go from strength to strength. The overall message right now is that the “US tank” will likely keep rolling.
No slowdown in AI spend
Meta (META-NASQ) plans to keep spending big on AI, which will see capex rise from $50 billion to $60-65 billion, likely driven by President Trump’s Project Stargate ambitions. This announcement comes at a time when analysts expected a peak in this capex cycle, with companies looking to reign in their chip and data centre spend. Should this theme play out across other AI players, chip makers and infrastructure providers could sustain those gains. In related news, Nvidia (NVDA-NASQ) edged up after losing $589 billion of its value in Monday’s DeepSeek AI market rout after stating that “excellent” advancements still require lots of its chips.
Tobacco’s Trump card
The Trump administration withdrew the menthol cigarette ban, which is a helpful development for British American Tobacco (BATSL-TRQX). The company also stands to benefit from other potential tailwinds, like lower US taxes and Trump aggressively addressing Chinese disposable vapes, which would boost the approved vape industry, of which BAT is by far the market leader. The stock was trading at a near 2-year high in British pounds and slightly below its recent September 2024 peak in US dollars following the news.
TFG sales fizzle out
Foschini Group (TFG-JSE) released a disappointing sales update, which sent the stock down -3.75% as local sales lost serious momentum in November and December last year, falling to low-single-digit levels. The good news is that margins look to be expanding nicely.
Stock focus: American Express
American Express (AXP-NASQ) reported record revenues of $65.9 billion, which was up 10% year-on-year. The Millennial and Gen Z client segments, where Amex really resonates, are driving this growth, which bodes well for the future. Travel and entertainment (+11%) was the fastest-growing spending category, with airline spending rising +13% and first-class airfares up +19%.
Additionally, consider your risk tolerance, investment objectives, and time horizon when assessing company performance for trading. This content is not meant as financial advice.
Petro Wells
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