Newsletter | October 2025 | Easing Cycle Begins: But Headwinds Remain

To the market’s expectations, the Federal Reserve Bank (Fed) cut interest rates by 25bps (0.25%) in mid-September. Among the main reasons cited for the rate cut by Fed Chair Powell were softer labour data and slow economic activity. The expectations after a rate cut is for companies to get local financing easier than before a cut, and the immediate reaction to the latest cut was small caps rallying.

Trump-Era Tariffs

President Trump held another string of high-profile meetings in September, including calls with President Xi-Jinping in discussion about tech and agriculture. Trump also went on a royal visit to the United Kingdom. The aim was to spotlight the UK-US trade partnership, with major focus on tech and nuclear deals. The UK’s main objective was to convince the US to exclude Pharmaceuticals from the newly imposed tariffs by the US and be granted preferential treatment along with other exposed industries from the UK. An agreement was also reached between the US and Japan for a cap on tariffs in the automobiles sector, with exceptions in aircraft and aircraft parts as well.

Though many of the tariffs take effect now in October, and some in staged phases, they still influenced September sentiment strongly, with firms and markets adjusting for the anticipation, and the potential for retaliation still exists.

Local Markets and Policies

Despite inflation easing from a 10-month high of 3.5% to printing 3.3%, the Monetary Policy Committee (MPC) kept the repo rate at 7.0% when they met mid-September. Based on the impact of their previous cuts, the MPC focused on keeping inflation anchored towards the bottom part of their target range. They assessed the risks to the inflation outlook as balanced and projected to be 3% by 2027. The decision to not change the rates did not come as a surprise to the market, with the rand mostly flat through the day of the decision. 

Market Index Performances Around the World

In rand terms, the Nasdaq Index rose by 2.8% for the month, while the MSCI World Index gained 0.6%, and the S&P500 Index was up 1.0%. In emerging markets, the MSCI India Index declined by 2.0%, while the MSCI China Index rose by 7.0%. The broader MSCI Emerging Markets Index delivered a positive return of 4.5%. The MSCI UK and MSCI Europe Indices were down 1.3% and 0.6%, respectively, while global bonds were down 1.9% for the month.

Locally, it was a strong month. Resource stocks continued their strong performance in 2025, returning 28.1% in September. Industrials rose by 0.5%, while Financials were down 1.6%. The Property sector was down 1.0%, and nominal bonds delivered a solid return of 3.3%, supported by a decline in the South African 10-year bond yield from 9.6% to 9.2% over the month. The FTSE/JSE All Share Index ended the month up 6.6%, while the rand appreciated by 2.5% against the US dollar, closing at R17.25.

One More Quarter

The Fed made its first rate cut since December 2024, signalling a continuation of an easing cycle after two years of tight policy before their first cut back in September 2024. President Trump has once again reignited trade uncertainty, while the rate cuts showed marginal market rotations as small caps rallied and mega caps paused. The South African Reserved Bank (SARB) chose caution with four to two members choosing to hold rates steady.

Though other central banks around the world had been persistently cutting rates, the Fed’s September rate cuts have set a tone for a global easing bias. A continuation of rate cuts can be positive for equities, while it also provides a window for more flows into emerging markets as investors search for higher yields. While tariffs announced in September take effect between October and November, corporate guidance could reflect margin pressure, especially for autos, furniture, and pharma. This will likely introduce volatility during earnings season.

Any signs of stronger Chinese demand could lift commodities and emerging markets exporters, including local resource stocks. If SARB keeps rates as is, local bonds could be stable, while equities track global risk sentiment, focusing on inflation path across the globe and USD trends.

The Fed will release their minutes in mid-October and there will also be another CPI print. These will confirm the direction of inflation and shape up the pace on rate cuts. Their final meeting will happen in December while the SARB will meet for the last time this year in November. 

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