Markets are no strangers to contradiction. This week, however, they had no choice as signals collided with force. Central banks tried to offer restraint, while cloaked in hesitation; trade tensions escalated with theatrical resolve; and earnings arrived dressed in optimism but lined with warning. Through it all, investors stood firm, but perhaps too confidently.
At the centre of the chaos, stood the United States (US) Federal Reserve (Fed), which held rates steady at a policy rate of 4.25% to 4.5%. While the hold in rates was anticipated; the unease around it wasn’t. Fed Chair, Jerome Powell’s remarks – carefully weighted but not entirely measured – betrayed a central bank torn between its public facade and internal tensions. Fuelling the Fed’s decision, US labour data gave the appearance of US economic strength. Yet, beneath the surface, US policy uncertainty thickened. With new tariffs pressuring the supply chain, and fiscal adjustments lagging rhetoric, the risk of imported inflation is no longer hypothetical – raising risks for the US economy.
South Africa followed suit, by offering markets contradictory messaging. The South African Reserve Bank (SARB) delivered a 25-basis-point cut. This was not a bold nor symbolic move by the SARB; just necessary. South African inflation has moderated, but the country’s disinflation owes more to dormant growth than decisive policy traction. Consumer demand remains anaemic and investor confidence is fractured. Local investors treated the cut without ceremony and little conviction. Markets are under no illusion that South Africa’s monetary policy easing will fix the country’s structural inertia. Yet the alternative, of doing nothing, is not an option.
Trump’s trade policy, which has been an ambient concern for global markets, suddenly had direct consequences for economies with the arrival of today’s tariff deadline. A new tranche of tariffs, sharp and hastily framed, landed. As of this morning, the minimum US trading tariff is 10% and Trump has categorised US trading partners into three groups, depending on their trade relationships. The hardest hit include Laos and Myanmar (40% each), Canada (35%), Switzerland (39%), South Africa (30%), and Taiwan and Sri Lanka (20% each). Southeast Asian economies Cambodia, Malaysia and Thailand were hit with a 19% rate, while Israel and Venezuela got away with 15%.
While Trump’s rationale may be vaguely strategic, the rollout was conspicuously performative. Now, portfolio managers are no longer modelling probability – they are modelling responses to this policy. Boards now have to revisit hedges and corporates are reconfiguring cost assumptions. For exporters, the margins that existed yesterday have already narrowed. In currency markets, the reaction was measured but unmistakable: there was pressure on the most exposed currencies, while the least entangled gained some strength.
Trump’s policies also bled into US corporate earnings season. What opened as a defensive third quarter saw some surprises. Aggregate earnings looked solid, but their composition raised questions. Tech and communications lifted the mean, energy missed the mark, while cyclicals (those that do well in a strong market, but slump during a downturn), did a flick flack. Management commentary rarely strayed into enthusiasm and outlooks were hedged, as questions on margins were deflected. A familiar cadence returned: shout out the numbers but downplay what comes next.
Despite the uncertainty across the markets, markets appeared to shrug off any restraint. Risk appetite swelled as equities moved with confidence, though the conviction seemed borrowed. Volatility measures, which were artificially compressed, only moved when headlines directed the narrative and bonds traded heavily. Treasury yields moved higher but not from belief in growth, rather from an absence of alternatives. Market rotations felt mechanical, with algorithms responding to optimism, rather than weighing its validity.
In this type of volatile environment, boldness is rewarded above introspection. Capital rotates faster than the consequences that will follow. Algorithms run ahead of policy interpretation. Human judgment often lags, or worse – overrides caution in favour of price action. Yet, the weight of macroeconomic data does not disappear. While growth is not collapsing, it is not accelerating. Inflation is cooling, but unevenly. Employment remains solid, but fragile at the edges. So, while there are no single figure shocks, if taken together, all of the whispers create a sense of unease.
Underneath all of it is a deeper recalibration. Investors are no longer reacting to surprises – they are trading around market ambiguity. This is a market not in denial, but in delay. It sees the risks, but chooses not to price them in just yet. Perhaps the belief is that an invisible force will intervene to turn things around, or maybe everyone is waiting for someone else to blink first.
While this state of play is not new, its endurance feels different. Certainty has become a luxury, not a baseline, and each data point, each policy tweak, each tariff announcement is not singularly decisive. Every new data release builds on the one before and reduces any margin of safety. It draws attention away from fundamentals and into positioning. And in that shift, markets don’t lose direction, they lose depth.
Where does that leave the thoughtful investor? Neither out of the market nor all-in. Investors are not bearish per se. Their suspicions are a little less dramatic; it is more about doubt than panic. Some hold the long view tightly, not because it promises protection, but because abandoning it now would concede to the noise. Others, however, are riding the wave, while keeping a firm eye on the exit.
What stood out most this week wasn’t volatility or volume. It was how smoothly the market absorbed friction; rate surprises, tariff shocks, and cautious guidance. Their reaction came in the form of minor repricing. It’s tempting to call that resilience but it may also be market numbness.
A LOOK AT THE MARKETS
Week’s key themes:
- A big data week sets US bonds’ course
- Wall Street remains resilient against an uncertain backdrop amid earning season
- Gold sheds 2% as dollar dominates
- Dollar puts up best weekly performance year-to-date
Bonds
The 10-year US Treasury yield stood at 4.38% at the end of July, as a busy week kept investors on their toes. Investor attention shifted between resilient US employment figures and softer consumer activity, while ongoing inflation prevented steeper price gains in government bonds. Tariff news and discussions overextending a truce in major global trade relationships contributed to volatility. Today’s Non-farm Payrolls report will be a critical release to complete this week’s barrage of information.
Germany’s 10-year Bund yield ended the week at 2.70%. Stability in yields was due to a measured stance from the European Central Bank (ECB), along with contained inflation and ongoing negotiations concerning transatlantic trade. Investors adopted a cautious approach amid mixed economic readings within the region.
The United Kingdom’s (UK’s) 10-year Gilt yield was at 4.57% at the end of July, having pulled back from earlier highs. Concerns about UK economic growth and expectations for interest rate cuts supported bond prices, while persistent global trade and tariff uncertainties limited further gains.
South Africa’s 10-year bond yield declined to 9.63% after peaking earlier in the month. Improved sentiment among global investors, strength in commodity-related revenues, and subdued inflation data underpinned local bond strength and distinguished South Africa’s market from global peers.
Equities
US equities hovered near record levels this week, before a modest dip at month-end. Strength in technology and earnings resilience drove the market upward, contrasting with mild pullbacks linked to new trade measures and shifts in political rhetoric during the week.
In Europe, the main euro area equity benchmark edged down slightly, reflecting caution amid renewed trade discussions and mixed economic surprises. Despite these factors, market levels remained well above those seen a year ago.
The UK’s FTSE 100 traded close to its historical peak. Strong performances from large multinationals and optimism regarding trade agreements provided support, although broader concerns about tariffs and economic growth limited the index’s further progress.
South Africa’s JSE All Share Index crossed the 100,000 mark for the first time and ended the month just below this milestone. Gains were driven by strength in resource sectors, improved global sentiment, and sustained foreign investment.
Commodities
Gold prices consolidated near $3,292/ounce, ending the week 2% softer following the stellar dollar run. Support persisted for gold as a defensive asset, despite the selloff this week, as central banks and safe haven seekers continue to find security in its glimmer.
Brent crude remained above $71/barrel, supported by anticipation of new trade agreements and supply constraints, including tightening conditions in the diesel market. Risks from potential new tariffs and weak consumer data in some major economies capped stronger gains.
Currencies
The US Dollar Index put up quite the fight in this past week, remaining at elevated levels, as the greenback sets itself up for the best week of 2025. Market participants monitored US policy developments, trade negotiations, and global economic signals for further direction. Higher expected inflation, on the back of trade policy, underpinned the dollar’s strength for the week, but the full movie is yet to unfold as tariffs play out, and the economic impacts filter through.
The euro sold off as a result of the stronger dollar, driven by trade policy and inflation concerns in the US. Economic and trade risks, however, will continue to drive this pairing.
Sterling edged downward due to weaker domestic economic data and increased expectations of interest rate cuts, in addition to the pressure from a robust dollar, with global trade uncertainties adding to the currency’s pressure.
For most of July, the rand rallied, supported by a strong performance in local equities and commodities, as well as renewed risk appetite among international investors. This week, however, the rand felt the pressure as the dollar pushed higher against most major currencies, and its value will continue to be driven by the major global themes.
*Please note that all information and data is as at the time of writing.
Key indicators:
USD/ZAR: 18.20
EUR/ZAR: 20.81
GBP/ZAR: 24.03
GOLD: $3,295
BRENT CRUDE: $71
Sources: LSEG Workspace, Trading Economics, Bloomberg and Trading View.
Written by Citadel Advisory Partner and Citadel Global Director, Bianca Botes.