The world has been in a constant state of flux since US President Donald Trump was inaugurated in January 2025. The US administration’s strategy of “flooding the zone” — doing so much so quickly that opponents cannot wrap their minds around what is going on, let alone mount a response — has been enormously effective. The global environment is in a situation of continuous flux, and profound changes are happening.
In this context, financial markets have been enormously calm. Other than the meltdown after the Liberation Day tariff announcements in April, we have not seen much that has ruffled market performance or functioning. At Davos last month, Canadian Prime Minister Mark Carney spoke about a rapture in global geopolitics. Markets are not reflecting a rapture.
The calm in markets belies the truth that we now live in a different economic and geopolitical world. Though the US backed off from the worst of its tariff threats, the global trade backdrop is forever changed. No-one is talking about the World Trade Organisation (WTO) anymore, and the deligitimisation of international geopolitical and economic institutions continues apace.
The UN is underfunded and its future is in question. The institutions that undergird global finance and on which we rely in times of crisis — the IMF and US Federal Reserve — will change in the years ahead. The economic and geopolitical forces set off by the US administration will not be reversed.
South Africa is undergoing its own profound change. The decline of the ANC’s electoral fortunes will precipitate lasting change in the country’s trajectory. Whether this will be for good or ill is still to be determined.
The country was under one-party rule since the National Party came into power in 1948. The party handed the reins over to the ANC in 1994, a period that ended when the ANC lost dominance in 2024. So for 76 of its 115 years of existence, South Africa has in effect been a one-party state.
No-one here knows how to operate in a coalition environment. Not businesses, nor the citizenry and definitely not the politicians. Will this change advance or retard economic progress? How should investors position?
Again, markets have been sanguine in the face of this change. Much was made of the election results in 2024, and markets were appropriately volatile. However, the formation of the government of national unity (GNU) after the ANC’s electoral loss and the ability of leaders of the constituent political parties to hold the coalition together, even under stress, has left room enough for markets to carry on as normal.
Adjusting to a state where political power is devolved and governing coalitions change between elections is going to take time. The opening of the political space creates openings for new actors — benign and malign — to emerge.
This calm is not reflective of the underlying reality. Case in point, the news that John Steenhuisen has stepped down from the DA leadership race could be important for the resilience of the GNU going forward, especially as its constituent parties go head-to-head in the local elections around the end of this year.
Coalition partners have had profound disagreements over important policy positions and have not been happy bedfellows. This first iteration of a coalition government at national level shows the difficulty of leading in this political formation, and it is not clear that this process will become easier as the political space becomes more fractured and competitive in the years ahead.
Adjusting to a state where political power is devolved and governing coalitions change between elections is going to take time. The opening of the political space creates openings for new actors — benign and malign — to emerge. It is imperative that all across civil society engage to get the outcomes they want. This kind of environment will reward those who lean in and will punish bystanders.
For markets, the sanguine trading environment is supported by easy monetary policy and financial conditions. When the cyclical environment changes, which it will, prices will move in ways that are less forgiving of uncertainty and possibly more painful.
This is not to say you should pull back on risk-taking now, but to warn that investing could be harder as markets become less predictable in the years ahead.
• Lijane is global markets strategist at Standard Bank CIB.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.