Opportunity abounds in an uncertain world 

Donald Trump’s return to the White House has ratcheted up tensions around the world, including among South African investors, who have been jealously eyeing impressive market performance in the US for so long. The experts are feeling the weight of uncertainty too, yet it is hard to find one who suggests that investors dramatically change their view on holding a portion of their portfolio offshore. 

Significant international conflicts in Ukraine and the Middle East, aggressive policy shifts, threats of tariff wars, and generally unpredictable decision-making during Trump’s first weeks in power added to investors’ anxieties about the markets, already under pressure from geopolitical tensions. 

There is a lot to be nervous about. But there is always something to be nervous about, even if it is inflated gains, bubbles that threaten to burst, or over-exuberance among investors. Investing comes with risk. Those who invest only in ‘risk-free’ assets face the risk of earning returns that are insufficient to offset inflation and meet their future liabilities. 

 Same old, same old challenges 

In the words of Rone Swanepoel, Head of Sales at Morningstar Investment Management South Africa, “No different than any other year, we face many uncertainties and challenges ahead. There is (as always) a multitude of factors at play on a macro level, but also on a market level. Trying to make forecasts based on politics, geopolitical tension and ‘unknowns’ is a losing investment strategy. We prefer to keep our eyes on the fundamentals and valuations, and ensure portfolios are constructed so that no single event in markets can provide a ‘knockout punch’.” 

The key to successful offshore investing, much like domestic investing, lies in careful planning, discipline and patience. While core investment principles remain the same, offshore investing comes with additional considerations, including currency fluctuations, varying market regulations, and political and economic risks unique to each region. 

Trying to make forecasts based on politics, geopolitical tension and ‘unknowns’ is a losing investment strategy

Reacting emotionally to market fluctuations, even when they are driven by game-changing global events, usually leads to costly mistakes. Panic selling locks in losses, and investment decisions driven by fear (or greed) often lead to regret. In good times and in bad, a well-structured investment strategy should focus on the evergreen fundamental principles, including basing your strategy on well-defined goals, maintaining a diversified portfolio, and leveraging compound growth. 

Keep those emotions in check 

Often, an adviser’s toughest job is to help clients resist the urge to react emotionally to events. As Linda Eedes, Investment Professional at Foord Asset Management, puts it, “Many advisers will tell you this is the most important part of their jobs. Often the best thing to do is nothing.” Describing financial advisers as professional hand-holders, Eedes says, “They hold their client’s hands through difficult times and make sure they don’t make emotionally driven mistakes.” 

Despite the uncertainties surrounding Trump 2.0, analysts maintain a measured perspective. Patrick Mathabeni, Senior Research and Investment Analyst at Glacier by Sanlam, says the broad outlook is that the Trump presidency will bring about volatility in markets in 2025, but “the US economy is still set to be strong in 2025 (US economic indicators remain positive) and earnings remain fairly robust”. 

Victor Mupunga, Head of Research at Private Clients by OM Wealth, points out that distinguishing between Trump’s rhetoric and actual policy remains a challenge. “There is also uncertainty around the sequencing of his policies, as some have conflicting economic effects. For example, his immigration stance could be inflationary, while his energy policies might lower prices. The net impact will depend on which policies take precedence and how they unfold.” 

Political events are notoriously difficult to predict, and their market impact is often counterintuitive. Rory Kutisker-Jacobson, Portfolio Manager at Allan Gray, warns against trying to time the market, noting that reacting to headlines rarely yields positive results.  

The risks are real but so are opportunities 

South African investors should “get used to uncertainty”, says Bernard Drotschie, Chief Investment Officer at Melville Douglas, the boutique investment management company for the Standard Bank Group. He adds, “The advantages of investing offshore, such as diversification from South African-specific risks and access to a broader range of investment opportunities across sectors and asset classes, remain unchanged.” Drotschie adds that the prospects for emerging economies like South Africa “will largely depend on their own reform efforts, as financial aid and preferential tariffs can no longer be taken for granted”.  

South Africa, despite its challenges, remains an attractive investment destination. Mathabeni says South African bonds are still offering handsome real yields as inflation is well under control, and equity valuations are still attractive with decent upside potential. 

Vuyo Mashiqa, Head: Equity and Equity Derivatives at the JSE, is also measured-yet-bullish, saying, “In a volatile global environment, investors tend to prioritise markets that offer depth, liquidity and strong regulatory oversight – qualities that remain core strengths of the JSE.”  

He adds, “While uncertainty can drive short-term market movements, it also creates opportunities for capital to be reallocated into well-structured, resilient markets. South Africa continues to offer a sophisticated investment ecosystem, underpinned by a strong financial sector, globally connected corporates, and a dynamic capital market. As geopolitical and economic conditions evolve, the JSE remains a key platform for investors seeking both stability and growth potential in a changing world.” 

Navigating economic insights correctly 

As always, a broader perspective is key and, as Mupunga from OM Wealth reminds us, history provides valuable lessons. Noting that markets have generally performed well under both Democratic and Republican administrations, he says economic fundamentals tend to outweigh short-term political fluctuations in the long term.  

Glacier’s Mathabeni adds, “While Trump is a volatile character, he is, in the final analysis, pro-markets and pro-business, albeit in an unorthodox or unconventional manner. He is clear about the desire to grow the US economy, contain inflation and possibly cut corporate taxes… all of which would be positive for global equities, notwithstanding the rollercoaster ride he introduces in the geopolitical realm, especially pertaining to tariffs (and their inflationary effect).” 

The South African economy, while resilient, represents only a small fraction of global economic activity. The offshore opportunity set is enormous. There are currently 279 companies and 2 483 bonds listed on the JSE, against a global selection of tens of thousands of equities and hundreds of thousands of bonds.  

South African investors cannot ignore global markets, especially with the shrinking JSE and higher Regulation 28 offshore limits. In February 2022, offshore investment limits for South African institutional investors, including pension funds, increased from 30% to 45%. Glacier’s Mathabeni notes that South Africans have been allocating more to offshore assets: “While geopolitics have impacted offshore investing, the main driver has been negative domestic factors and strong offshore returns, particularly in the US, despite the rand deterring some investors.” 

Offshore investing remains vital for diversification, protecting against local risks, and accessing global growth. While Trump 2.0 adds uncertainty, offshore diversification remains key. A well-structured portfolio helps navigate volatility and seize opportunities. The world is uncertain but for those willing to embrace it, opportunity abounds.