Disclosure: This article is posted to inform readers and not to provide financial advice.
What is an Economic Review?
An economic review helps make sense of the broader financial and market developments that shape our everyday lives. It pulls together key data and events (such as inflation trends, interest rate changes, political shifts, or market movements) and expands on their influence on investment returns, the cost of borrowing, or even job prospects.
This Q2 2025 Economic Review looks at the global and local developments from April to June 2025, highlighting the factors that affected markets and investor confidence. Whether you’re a seasoned investor, business owner, or just staying informed, this review offers useful context to help you navigate a constantly changing economic landscape.
This Q2 2025 Economic Review looks at the global and local developments from April to June 2025, highlighting the factors that affected markets and investor confidence. Whether you’re a seasoned investor, business owner, or just staying informed, this review offers useful context to help you navigate a constantly changing economic landscape.
As we reach the midway point of the year, here is a recap of The Markets:
Global and Local Markets in Summary
The second quarter of 2025 was marked by heightened geopolitical tensions, policy uncertainty, and uneven economic performance. Globally, investor sentiment was weighed down by renewed concerns over trade tariffs following U.S. President Donald Trump’s announcement of wide-ranging tariff measures. The renegotiation of key bilateral trade agreements and growing friction with U.S. trade partners meant further uncertainty.
At the same time, ongoing conflicts in Eastern Europe and the Middle East added to global volatility. While these events initially rattled markets, the broader impact remained relatively contained as conditions stabilised by the end of the quarter.
Locally, South African markets delivered a strong performance despite a backdrop of low economic growth and persistent unemployment. Improved relations within the Government of National Unity (GNU), alongside a temporary pause in U.S. tariff escalation, helped support the rand and boost investor confidence. South African equities and bonds posted solid gains, even as structural economic challenges and high unemployment remain.
At the same time, ongoing conflicts in Eastern Europe and the Middle East added to global volatility. While these events initially rattled markets, the broader impact remained relatively contained as conditions stabilised by the end of the quarter.
Locally, South African markets delivered a strong performance despite a backdrop of low economic growth and persistent unemployment. Improved relations within the Government of National Unity (GNU), alongside a temporary pause in U.S. tariff escalation, helped support the rand and boost investor confidence. South African equities and bonds posted solid gains, even as structural economic challenges and high unemployment remain.
Global Economic Overview
Trade and Geopolitical Tensions:
At the beginning of April the U.S. President Donald Trump announced sweeping trade tariffs on several of America’s trade partners – dubbed “Liberation Day.” Just a week later, he postponed implementation by 90 days. Although this delay was widely expected, the scale of the tariffs sparked concern in global markets.
Trump’s broader isolationist stance – characterised by sector-specific budget cuts and the use of tariffs as a political tool – contributed to investor uncertainty. Despite the hawkish tone, key U.S. industrial sectors remained resilient, and the federal funds rate (which is the U.S. central bank’s interest rate target) was left unchanged. While inflation remained above the Federal Reserve’s 2% target, it was relatively contained.
Trump’s broader isolationist stance – characterised by sector-specific budget cuts and the use of tariffs as a political tool – contributed to investor uncertainty. Despite the hawkish tone, key U.S. industrial sectors remained resilient, and the federal funds rate (which is the U.S. central bank’s interest rate target) was left unchanged. While inflation remained above the Federal Reserve’s 2% target, it was relatively contained.
Weakened Dollar:
Following the events in April, we saw a notable market reaction: equities sold off, but Treasury yields rose and the U.S. dollar weakened – an unusual pattern, since investors typically move to safe-haven assets, causing yields to fall and the dollar to strengthen. This signalled growing doubts about the U.S. dollar’s role as the world’s primary reserve currency, and the reliability of U.S. Treasuries as a safe haven.
As the U.S. dollar hit multi-year lows against major currencies like the euro, pound, and yen, China’s economic recovery and Germany’s fiscal stimulus added further downward pressure.
As the U.S. dollar hit multi-year lows against major currencies like the euro, pound, and yen, China’s economic recovery and Germany’s fiscal stimulus added further downward pressure.
Equity Markets:
Despite this, U.S. equities had a strong quarter. The S&P 500 Index – which tracks the performance of 500 of the largest publicly traded companies in the United States – rose by 10.9%, marking its best quarter since Q4 2023. This is a great example of why it’s never a good idea to try and time The Markets, because investors who might have exited equities in anticipation of volatility would have missed out on this strong performance later on!
Other major markets also delivered solid returns. London’s FTSE 100 gained 9.6%, and the Euro Stoxx 50 – which tracks 50 large companies in the eurozone – rose by 12.2%, both measured in U.S. dollars. On the other hand, China’s performance was more muted: the Hang Seng Index gained 4.9% and the Shanghai Composite Index rose by 5.6%.
Other major markets also delivered solid returns. London’s FTSE 100 gained 9.6%, and the Euro Stoxx 50 – which tracks 50 large companies in the eurozone – rose by 12.2%, both measured in U.S. dollars. On the other hand, China’s performance was more muted: the Hang Seng Index gained 4.9% and the Shanghai Composite Index rose by 5.6%.
Commodities and Conflict:
Commodity prices were volatile in Q2, particularly due to escalating tensions in the Middle East. Military action by Israel against Iranian nuclear sites – later joined by the United States – raised fears of wider regional conflict. In response, gold continued its upward momentum, climbing by another 5.7% during the quarter.
Global Growth Outlook:
According to the International Monetary Fund’s (IMF) latest World Economic Outlook, global growth projections for 2025 were revised downward from 3.3% (in January) to 2.8%. While large economies like the U.S., China, and India achieved modest growth in the first quarter, the global outlook remains cautious.
Tensions in Ukraine and Gaza also continue to pose a risk to global stability. However, markets proved relatively resilient, with limited long-term fallout from these conflicts.
Tensions in Ukraine and Gaza also continue to pose a risk to global stability. However, markets proved relatively resilient, with limited long-term fallout from these conflicts.
Local Market Overview: South Africa
Currency and Political Climate:
The South African rand initially weakened against the U.S. dollar but recovered later in the quarter. This rebound was largely attributed to the postponement of U.S. tariffs and improved relations within South Africa’s Government of National Unity (GNU), particularly between the ANC and DA.
Strong Asset Performance:
South African assets delivered a solid quarter. The FTSE/JSE Capped SWIX Index – which represents a broad group of locally listed companies – was up 9.7% in rand terms (13.7% in USD) for Q2, and up 16.1% in rand (23.8% in USD) for the first half of 2025.Government bonds also performed well, with the All Bond Index gaining 2.3% in June.
Economic Growth and Sector Performance:
South Africa’s economic growth remained sluggish. Quarter-on-quarter GDP growth was just 0.1%, and year-on-year growth came in at 0.5%. Some sectors performed better than others:
- Agriculture, forestry and fishing saw a 15.8% rebound in Q1 2025.
- Manufacturing contracted by 2.0%.
- Mining and quarrying declined by 4.1%.
Interest Rates and Employment:
The SARB cut the repurchase rate twice in 2025 – once in January and again in May – each time by 0.25%. As we move towards global best practice of a single-point inflation target, there is speculation that the inflation target could be set at 3%.
In Q1 2025, the official unemployment rate was 32.9%, while the expanded unemployment rate – which includes discouraged job seekers – stood at 41.1%.
In Q1 2025, the official unemployment rate was 32.9%, while the expanded unemployment rate – which includes discouraged job seekers – stood at 41.1%.
Budget and Market Trends:
Finance Minister Enoch Godongwana delivered the National Budget speech in May, indicating the allocation of financial resources in line with the President’s State of the Nation Address. Notably, VAT was announced to remain at 15%, rather than being increased by 0.5.
South African shares generally performed well in the first half of the year.
South African shares generally performed well in the first half of the year.
- Gold and platinum shares posted strong gains.
- Telecom and industrial “rand hedge” stocks (companies that earn in foreign currency) did well.
- Retail stocks struggled, while banking and insurance shares underperformed.
The FTSE/JSE All Bond Index closed the quarter with a yield-to-maturity of 10.23%, and the rand ended Q2 stronger at R17.70 to the U.S. dollar.
Conclusion
We’ve certainly been experiencing heightened levels of trade uncertainty, but it’s important to stay the course as an investor to achieve gains in the long term. Trying to play the markets is not a strategy that tends to pay off.
Consider consulting with our Certified Financial Planners (CFP) at TVC Wealth and Health Managers. A good financial advisor offers valuable guidance and support in managing your finances and achieving your financial goals, as well as aligning your investor portfolio with these goals.
Consider consulting with our Certified Financial Planners (CFP) at TVC Wealth and Health Managers. A good financial advisor offers valuable guidance and support in managing your finances and achieving your financial goals, as well as aligning your investor portfolio with these goals.
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