A sea of red… That’s pretty much all you saw in stock markets late last week. In fact, Thursday was the S&P500’s worst drop since June 2020, while it also marked the largest single-day loss for the Nasdaq100 Index in HISTORY.

Of course, SA stocks weren’t spared. The JSE All Share lost roughly R1 trillion – with less than 10 companies ending the day in the green.
It’s carnage out there and things could get much worse before they get any better for SA and investors.
Here’s why and what to do…

SA stock market hit with a double-whammy…

1) SA parliament approved the budget framework, but with a caveat…

Treasury has 30 days to find alternatives to the VAT increase and the non-adjustment of personal income tax brackets to account for inflation. That’s around R31.5 billion.

Forgive me for being pessimistic here, but if Treasury couldn’t find alternative revenue sources over the past four months, then I don’t hold much hope over the next 30 days. Plus, you may have already received VAT increase notifications from companies.

Additionally, the budget approval has also driven a wedge in the GNU. If the DA leaves, then so will investor confidence.

The next 30 days could make or break SA.

2) Trump slaps 30% tariffs on SA goods

While not unexpected, it could lead to higher inflation, job losses and lower GDP growth in 2025. Specifically, vehicle exports and agricultural products will most likely bear the brunt of the tariff damage – two crucial SA sectors.

Fortunately, there are some exceptions.

PGMs, gold bullion, coal, chrome, manganese and a few others are exempt from tariffs, which may slightly dampen the economic fallout. After all, minerals contribute (R65.3 billion in 2024) a large part of exports to the US – with PGMs accounting for 76.3% of the total. However, diamonds, iron ore and steel are subject to 30% tariffs.

Nevertheless, according to reports, a delegation of SA business and labour leaders recently met US officials to ease tensions, and the outcome hinges on “fair trade”. In other words, the US is adamant on addressing SA’s roughly $4.2 billion trade surplus.

One way to do this is end AGOA (which expires later this year anyway). However, that could destroy major SA sectors important to employment and economic growth. Another solution to help reduce the surplus is we simply import more US products. Or even come to an agreement whereby SA allows the US more access to critical minerals they desperately need.

Simply put – SA’s economy will be in BIG trouble if we don’t resolve tensions with the US, and soon.

Already, we can see the impact of both events. The rand raced past R19/$. Meanwhile, SA’s 10-yield bond rose, which means higher borrowing costs.

What to do as a stock market investor…

Make no mistake, it’s carnage out there in the markets right now. However, volatility and uncertainty are synonymous with investing. It happens a lot. And it even happens for the same reasons as today.

Trade Wars, tariffs, recession, rising inflation dominated the headlines during Trump’s first presidential term. And yet the market recovered.

In fact, over the past five years:

• The S&P500 is up +116%
• The JSE All Share is up +93%
• The Nasdaq is up +124%

And this includes the recent “stock market destruction”.

Additionally, there is absolutely no way to assess what will happen next to the economy and the markets. Nobody knows anything. We are in uncharted waters.

So, be patient. Wait for the uncertainty to subside. And remember, markets like today offer you another shot at explosive wealth.