‘To be honest, we don’t know what Trump will do’ – Ninety One

At a time when South Africa seems to be getting its ducks in a row, the world is starting to look shaky, says Peter Kent, co-head of emerging market fixed income at Ninety One.

He was among Ninety One’s portfolio managers who weighed in on the prospects for financial assets in the year ahead during a webinar on Tuesday.

Read:
Trump tariffs pose inflation risk: Kganyago
Trump promises ‘common sense’ ideas in inaugural address

Kent says 2024 has been a good year for South African assets, while inflation is back under control and interest rates have come down. In addition, rating agency S&P has changed its outlook on South Africa from neutral to positive.

But as the South African story is turning more positive with growth slowly edging up, there is global uncertainty, which will result in volatility hanging over financial markets, he notes.

Trump’s tariffs and policies

Although extensive analysis has been done on the possible impact of Trump’s policies and tariffs it is “time for humility”, according to Kent. “To be honest, one doesn’t know what he is going to do.”

On Monday, Donald Trump was inaugurated as president of the United States, making a political comeback after Democrat Joe Biden defeated him in 2020.

Read: Oil slips as Trump signals Canada tariffs, domestic energy push

During his campaign last year, Trump repeatedly threatened he would impose tariffs on other countries as a way to bring in revenue and to force US companies to manufacture goods locally.

According to Kent, Trump’s use of tariffs is not only a trade measure but also a national security measure.

Read/listen: Global markets brace for Trump’s policies: What it means for SA

“The reason he talks about tariffs on Mexico and Canada is not because there’s a trade disadvantage, but ultimately there are national security objectives on immigration and drugs. He will use tariffs in all forms – whether it’s for trade or national security to ultimately negotiate better interests for America.”

Read: Gold advances as Trump stands by plans for Mexico, Canada tariff

Trump reiterated on Monday after his inaugural address that he plans to hit Mexico and Canada with tariffs of up to 25% until the two countries stop the flow of illegal drugs, such as fentanyl, and undocumented immigrants into the US.

Trump and the dollar

The dollar has been a “wrecking ball” since Trump’s election and the big question is whether its strength will continue, Kent notes.

The new president is on record as saying that he is not in favour of a strong dollar. “He wants to reindustrialise the Rust Belt and he wants to rebalance his trade deficits. A strong dollar doesn’t help with that.

“He also doesn’t want inflation, although tariffs on consumer goods will result in inflation,” Kent says.

Iain Cunningham, head of multi-asset growth at Ninety One, notes that the Trump administration has been talking about seeking a weak dollar on a cyclical basis, while maintaining the reserve currency of the dollar.

“There are many options they can use to weaken the dollar. There could be a multi-lateral currency intervention to weaken the dollar if the Trump administration is going to use tariffs to achieve what they want.”

Dominance and tech billionaires 

Clyde Rossouw, portfolio manager and co-head of quality capability at Ninety One, notes that financial markets will not focus solely on a US president in the coming year.

“But what is different this time is the dominance Trump has in surrounding himself with very powerful people in economic circles. Like the tech CEOs who are trying to curry favour with him.”

Read: Biden cites threat from ‘extreme wealth’ in farewell address

Several tech billionaires – including Elon Musk, owner of social media platform X and founder of Tesla, Amazon founder Jeff Bezos, Meta’s Mark Zuckerberg and Apple CEO Tim Cook – attended some of Trump’s inaugural celebrations.

Many of them were critical of Trump during his first term.

“Don’t think there isn’t a grand scheme to make sure their economic interests are served,” Rossouw notes.

He warns that Trump should be taken seriously, but not literally.

“When Trump says something like ‘Perhaps we’ll invade Greenland’, don’t look at it literally, but rather what he means – seemingly improving America’s global footprint.”

Days before his inauguration, Trump made utterances that he will take over Greenland from Denmark, reclaim the Panama Canal and annex Canada.

Read: Greenland eyes benefits in Trump’s proposed land grab

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