Trading update : 29 April 2025

Some calm returned to markets after more positive messaging from the Trump administration on its trade war with China and Fed independence. However, the “Sell America” trade continues to gather momentum, with investors shifting from US equities and the dollar to emerging markets. As the IMF continues to wield its axe to growth forecasts, time is no longer on America’s side to knock out revised trade agreements.

Some calm returns

After a volatile week, US equity markets, including the S&P 500 (VOO-NASQ), rebounded strongly and the US dollar bounced off recent lows as President Trump walked back his threats to axe Fed Chair Jerome Powell. The administration is also working behind closed doors to de-escalate the tariff stand-off with China.

Sell America trade boosts EMs

Emerging market stocks rose and recouped their losses for the year, as investors expect the asset class to benefit from eroding confidence in US equities. The MSCI Emerging Markets Index (EEM-NASQ) gained as much as 1.4%. The resilience stands out as US stocks remain 10% down for the year. According to a Bloomberg report, money managers are increasingly seeing the Trump administration’s flip-flops on tariffs and other policies as a risk for the US economy and dollar assets, inspiring a so-called “Sell America” trade.

All engines firing!

GE Aerospace (GE-NASQ) surged +6% on the back of an 11% kick in revenue and a 60% pop in adjusted income. The results were miles ahead of analyst expectations. Management also reaffirmed their full-year guidance and talked to persistently strong demand for their jet engines.

Trade talks take time

It normally takes 18 months on average for the US to negotiate a trade deal as both countries go through imports line by line and then negotiate the tariff for each product category. Apollo Academy explains that the negotiations can also involve discussions about non-tariff barriers, tax differences, rules of origin discussions, IP rights, labour standards, environmental standards, anti-dumping, dispute resolution, digital trade and e-commerce, government procurement, and security and defense considerations. The bottom line is that trade negotiations take time because they are complex. Against this backdrop, if the US doesn’t change its current policy direction, the probability of a US recession 2025 rises to 90%.

US credit crunch

In another warning sign that US consumer health is waning, the largest credit card companies are preparing for the economy to get worse. The Wall Street Journal reported that US consumers are holding off on non-essential splurges such as vacations. Execs at American Express (AXP-NASQ) and Citigroup (C-NASQ) said that travel and entertainment spending lost momentum in Q1 while spending in less discretionary categories picked up. The share of cardholders making only the minimum payment is also running above pre-pandemic levels, according to insights from Capital One (COF-NASQ).

IMF wields the axe 

The IMF slashed its global growth forecast for this year and next, warning the outlook may deteriorate further. Bloomberg reported that China’s growth estimate was cut to 4% in 2025 and 2026 while South Africa’s economic growth in 2025 was cut from 1.5% to 1%. Citing “tariff rates to levels not seen in a century and a highly unpredictable environment,” the report also lowered South Africa’s growth forecast in 2026 from the earlier 1.5% to 1.3%.

ECB cuts again

The European Central Bank (ECB) lowered interest rates for the seventh time since last June, decreasing the deposit rate by a quarter-point to 2.25%. The ECB cited increased downside risks to economic growth due to trade tensions, which may lower euro-area growth and drag down investment and consumption. Markets now expect three more reductions before the year is out.

Food for thought

Uber Technologies Inc. (UBER-NASQ) is in talks to acquire Turkish food delivery platform Trendyol Go, according to a Bloomberg report. Trendyol Group is majority-owned by Chinese e-commerce giant Alibaba Group Holding Ltd.

The cost of gold

Newmont Corp. (NEM-NASQ) posted its highest quarterly costs in at least nine years, partly due to its operations at one of Australia’s largest gold mines. The world’s top gold producer told Bloomberg that the all-in sustaining cost of producing the precious metal hit $1,651 an ounce in the first quarter – about 13% more than the prior quarter and is the highest on record since 2016. While high, the costs were lower than analysts had expected.

Sector focus: Real Estate

An updated Investec forecast identifies the real estate sector as a source of growing income in an uncertain world. With all but one fund reporting 1Q25A results, the sector has received an earnings upgrade as it will provide a relatively safer return profile for investors backed by an income yield of 9.1% and inflationary earnings growth given that key risks of leverage, over-rents, and cheap debt have reduced significantly.

Stock focus: Sasol

Margins at Sasol (SOL-JSE) continue to face pressure due to the prevailing global macroeconomic pressures and geopolitical uncertainties. The company also reported a year-on-year drop in coal production (-2.2%), chemical sales volumes (-6.1%) and chemicals revenue (-0.5%).