Global Market Overview | August 2025

01 September 2025

Written by the FNB Wealth and Investments Research team

Financial markets performed well in August despite a cautious underlying tone across global markets. Investors continued to monitor ongoing tariff announcements, negotiations between the United States (US), Ukraine and Russia regarding a possible peace treaty, earnings from AI-related stocks, as well as key economic readings out of the US and how it may affect the US Federal Reserve’s interest rate path going forward. Despite a myriad of reasons to pull back, markets remained resilient and steadfast with the MSCI World Index and MSCI Emerging Market Index delivering gains of 2.6% and 1.5%, respectively. Major tech stocks in the US recovered from a mid-month AI sell-off to end the month on a firmer footing (Magnificent 7 Index: +2.0%). The broader US market also benefitted from the shift in sentiment with the Rusell 2000 Index rallying 7.0%.

In the US, Fed independence has come into the spotlight and Fed Chair Jerome Powell’s Jackson Hole speech held a more dovish tone. Global markets reacted positively to Powell’s commentary as it emphasised that the "shifting balance of risks” may warrant adjusting policy stance. He noted that the labour market is in a “curious kind of balance” and that downside risks to employment are rising. He further said that the effects of tariffs on consumer prices are “now clearly visible” but that it is reasonable to expect these effects to be relatively short lived. Both the options and futures markets are now implying an over 80% chance of a rate cut (up from 70% prior to the speech) in September. The US administration intensified its attacks on the central banks. President Trump announced that he was firing Federal Reserve Governor Lisa Cook “effective immediately”, saying there was “sufficient reason” to believe she had made false statements on mortgage agreements, giving him cause to fire her. Cook dismissed these accusations and said that she would challenge this action in court.

Aside from the political squabble, Microchip producer Nvidia, the largest company in the world by market cap, also garnered significant attention with the company’s quarterly earnings announcement widely viewed as a bellwether for AI demand. The group set a fresh sales record in the second quarter, surpassing Wall Street expectations for its artificial intelligence chips. There were some concerns highlighted surrounding the near-term demand outlook and export restrictions, particularly to China.

Across the pond, European markets also locked in decent gains (Euro Stoxx 600 Index: +1.0%) with the European Commission recently proposing that duties on imported US industrial goods be removed in return for reduced US tariffs on European cars. However, political turmoil in France, the Eurozone’s second largest economy, dented sentiment. Three main opposition parties stated that they would not back a confidence vote, which Prime Minister Francois Bayrou set for 8 September, over his plans for sweeping budget cuts.

In the Asia-pacific region, China continued to gain upward momentum with the MSCI China index adding 4.2% as investors shrugged off generally soft economic releases while focusing on stimulus measures and the tariff delay. Earlier negotiations with the US surrounding tariffs led to President Trump singing an executive order that would prevent high US tariffs on Chinese goods from snapping back into effect for another 90 days following the prior 1 August deadline. The extension until early November provides crucial time for the seasonal autumn surge of imports for the Christmas season, including electronics, apparel and toys at lower tariff rates.

The local market continued to benefit from risk-on appetite with the All Share Index up 3.5% (USD terms: +6.8%). The recent inflation reading was at the top of investors watchlist with the release showing that CPI trended higher in July as expected. However, core inflation remained broadly flat. The new proposed lower inflation target by the South African Reserve Bank (SARB) remained in focus. Fundamentally, a failure by government to fully subscribe to a 3% inflation target will weaken the efficacy with which the central bank keeps inflation in check. As long as many of the costs that consumers face daily (notably administered cost increases) remain elevated, inflation expectations will remain heightened, making the path to 3% a rocky one.

Outlook

Local

• High frequency data suggests that SA’s GDP growth improved in 2Q25 after a disappointing start to the year. Upcoming growth figures should highlight how activity has continued to be supported by consumer spending. Furthermore, productive sectors, such as mining and manufacturing, should have built up enough momentum in the latter part of the quarter to contribute positively to growth. Trade data also shows resilience in the agricultural sector. Overall, we anticipate 0.5% q/q and close to 0.8% y/y growth in 2Q25.
• Beyond the second quarter, we have seen slowing momentum in real income gains and spending growth. This highlights waning impetus from the two-pot withdrawals, rising inflation, and still-elevated credit defaults. That said, inflation should rise to only a touch above 4% in 2H25 and average 3.4% this year – remaining supportive to real income growth and easier monetary policy. We predict average inflation of 3.9% next year and 3.5% in 2027, before settling closer to 3% in 2028. This would create space for further monetary policy easing from the latter part of 2026, and we think the policy rate will drift towards 6% in the next few years.
• What will also be supportive to demand are wealth effects from robust stock market gains and real house price growth. In addition, there are indications of growing activity in the informal economy, which has supported employment and income generation.
• Nevertheless, greater market access and productivity-enhancing reforms remain key to improving broader investment and employment creation. While elevated global uncertainty can weigh on near-term investor sentiment, there are still opportunities for SA to compete for new trade partnerships and position itself as a value creation destination over the longer run.
• There is limited room for error and failure to remove structural impediments could see the economy stuck in a low-growth trajectory, with the per capita share continuing to regress, and policy largely emergency-driven.

Global

• Proposed policy changes by President Trump (tariffs, taxes, deportations, and deregulation) are increasing uncertainty in global markets and economies. Implementation (or lack thereof) of these policies will dictate the direction of markets over the next few months. Some trade agreements have been reached (with Japan, EU) which could remove some uncertainty, but tariff levels are still higher than what was expected at the beginning of the year with 50% tariffs on India also kicking in in August. Geopolitical events (Israel/US/Iran and Russia/Ukraine) are also contributing to the uncertainty.
• Other actions from the Trump administration, like firing Fed governors, firing the labour statistics boss, and taking stakes in private companies are adding uncertainty and is testing the credibility of the independence of the central bank.
• US growth expectations for 2025 have fallen from 2.3% at the start of the year to about 1.5%, mainly on the back of the uncertainty of tariff implementation (timing and end-rate). Expectations improved somewhat during August as hard data remained strong.
• This month, US CPI and core CPI came out at 2.7% and 3.1%, respectively, slightly higher than expectations. Goods inflation is showing some evidence of tariff passthrough. Inflation expectations also increased; University of Michigan one-year inflation expectations rose to 4.9% from 4.5% in the previous month. This is still some way off the 2% target of the Fed. Shelter inflation and core services should continue to trend lower, causing overall inflation to move down towards target, but risks remain that inflation proves “stickier” than expected (depending on the rates where tariffs eventually settle).
• The Fed’s interest rate cutting cycle that started in September 2024 has come to a halt as they paused rates again at their latest July meeting. However, Federal Chair Powell hinted at the Jackson Hole symposium that downside risks to employment are rising, which may warrant adjusting the Fed’s policy stance.
• Political tensions rose in France as the Prime Minister called for a confidence vote as he seeks to force support for his budget plan that foresees €44 billion of fiscal tightening. The vote is due on 8 September and consensus is that the minority government is likely to lose the ballot.
• After a strong Chinese 2Q25 GDP print of 5.2% y/y, data has disappointed in July and August. Retail sales, industrial production, fixed asset investment and property investment all slowed. Authorities are expected to step in and stimulate the economy with fiscal support. Exports to the US have fallen sharply but exports to the rest of the world have increased by a similar amount as China seeks new trading partners to overcome steep US tariffs.
• The US dollar continued its weakening path, after rebounding slightly in July. The dollar index is down by almost 10% year-to-date. Capital flows for the year have been out of the US into other less expensive markets as uncertainty remains (with Europe and emerging markets the biggest beneficiaries).
• Gold also performed well in August, rising by 4.8% to $3 448 per fine ounce. Reasons include central bank buying, geopolitical tensions, uncertainty around policies, and growing investor appetite. Platinum prices rose 6.1% during the month.
• Given all the above uncertainties, we are closely aligned to our strategic asset allocation benchmarks, with a slight defensive twist.