Global trade war on the cards? Hedging out the risk

The global markets are facing a period of uncertainty as traders seek further guidance on the path of US interest rates amidst economic reports that have muddled the assessment of price pressures. Locally, the benchmark 2030 government bond saw little change in early deals, with the yield up slightly to 9.1 per cent ahead of the national budget presentation by Finance Minister Enoch Godongwana. To gain insights into the current market dynamics and the challenges ahead, CNBC Africa spoke with James Turp, Fixed Income Portfolio Manager at Sanlam Investments. Turp highlighted the volatility and geopolitical risks that have characterized the market at the start of 2025, particularly fueled by the tariff policies implemented by US President Trump. Key Theme: Uncertainty and Risk Management in Global Markets Key Points: 1. Market Volatility and Geopolitical Risks: Turp emphasized that the year began with expected volatility and geopolitical risks, notably driven by the aggressive stance on tariffs taken by President Trump. The uncertain landscape has led to a cautious approach in managing portfolios and assessing risks. 2. Bond Strategy Amidst Uncertainty: With concerns about maintaining the momentum of the previous year's strong bond market performance, Turp suggested a reduction in risk exposure to navigate the current market conditions. He underscored the importance of monitoring inflation data and adjusting strategies accordingly. 3. Economic Indicators and Inflation Trends: Turp discussed the impact of inflation on investment decisions, both in South Africa and the US. He highlighted the divergence in inflation trends between the two countries and the implications for interest rates. The evolving economic landscape and inflation expectations are key factors influencing bond yields and market movements. Quote: According to Turp, 'Don't be too risk tolerant at this point, or don't take too much long end risk is the thinking right now.' This reflects the cautious sentiment in the market and the importance of prudent risk management in uncertain times. As market participants navigate the complex terrain of global trade tensions and economic indicators, the role of data-driven decision-making and proactive risk management becomes paramount. The upcoming budget announcements and inflation reports are expected to offer further insights into the direction of markets and the opportunities that lie ahead. Turp's analysis sheds light on the challenges and strategies needed to navigate the evolving landscape of global finance.