How S.African investors are shifting strategy amid rising recession risks

US President Donald Trump's 'liberation day' marked a significant turning point for the global economic and trade system. The imposition of sweeping tariffs on April 2 led to a tumultuous period for US stocks and Treasuries. While a 90-day reprieve was later announced for most nations, the International Monetary Fund (IMF) made a stark downward revision to its forecasts for world growth for the current year and the next, cautioning that the outlook could deteriorate further. To delve into the strategies needed to navigate the uncertain global economic landscape, Kevin Lings, the Chief Economist at Stanlib, provided insightful perspectives. Lings started by shedding light on the unprecedented nature of the tariffs imposed by President Trump. Describing the tariffs as extreme, he expressed surprise at the lack of clarity surrounding the calculations that led to their imposition. Lings highlighted the panic and shock these actions instigated among financial markets and businesses globally. The magnitude of the tariffs exceeded even the worst-case scenarios considered by analysts, exacerbating uncertainties and prompting urgent reassessments of economic forecasts. As the 90-day pause on tariffs continues, Lings emphasized the need to address the critical question of the US-China relationship. With most countries now facing a 10% tariff, negotiations between the two economic powerhouses carry immense significance. Lings pointed out the unsustainability of the high tariffs imposed by both the US and China, stressing the ripple effects on global trade and supply chains. He suggested that misjudgments on the duration and intensity of the trade dispute could lead to long-term damage to economic relations. Moreover, Lings delved into the implications of central bank policies amidst the evolving economic landscape. He noted the stagflationary conditions in the US, where economic slowdown coincides with rising inflation, posing a conundrum for the Federal Reserve. While acknowledging the pressures on the Fed to consider rate cuts from President Trump, Lings predicted a cautious approach by the central bank, awaiting further economic developments. In the context of South Africa, Lings analyzed the potential for rate cuts by the Reserve Bank. Drawing attention to imported deflation from China and unexpected declines in inflation for various goods, he suggested that the central bank could seize the current window of opportunity to lower interest rates. Despite the Bank's conservative stance aimed at maintaining a 3% inflation target, Lings argued that prevailing economic conditions and inflation trends warranted a proactive adjustment in interest rates. In conclusion, Lings underscored the urgency for South African policymakers to consider rate cuts sooner rather than later. The evolving global economic landscape and the shifting dynamics of international trade necessitate adaptability and strategic responses from investors and policymakers alike. As uncertainties persist and recession risks loom, recalibrating investment strategies and monetary policies becomes imperative for safeguarding economic stability and growth.