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00:01
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Donald Trump was elected as the 47th President of the United States in November 2024 and duly inaugurated on the 20th of November of this year. Trump has promised to do much to change how the United States works. As promised, his proposed far ranging reforms in amongst other areas, foreign affairs, trade and immigration to achieve his America First objective. |
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00:24
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Working out what this administration will do and its impact on financial markets has consumed the analysts, money managers, traders and policymakers since before the US election results were announced. How should we be thinking about US policy in the year ahead? |
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00:39
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How have markets responded to Donald Trump's election thus far? How could markets trade as the year unfolds? I am Mamokete Lijane, Global Market Strategist at Standard Bank, and I'm joined in studio by Tom Anderson, Head of Foreign Exchange at Standard Bank Global Markets, to discuss this topic. |
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00:55
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Welcome, Tom. |
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00:56
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Thanks for having me on. |
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00:57
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Since prior to the US elections, there was a lot of talk around the different positions that were taken by the different political parties and candidates that would have affected markets. There was a lot of speculation around what each candidate stood for more especially Trump. Trump spoke a lot about immigration. |
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01:16
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He spoke a lot about tariffs. He spoke a lot about what the structure of the US economy should look like, talked a lot about global integration more broadly, spoke a lot about oil. So there was a lot in the alphabet soup on policy. |
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01:34
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And Trump won the elections in December. What are we thinking about the policy positions of his administration as previously articulated, and where we are now? |
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01:47
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Thanks very much for having me on your show. |
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01:50
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I think the interesting thing is probably to take it back a stage and think about the types of or the direction that Trump was ideologically going in prior to the election. So we had a period in which he seemed to be somewhat governed. This was when Biden was still running, somewhat governed by a group of people who are trying to put something into practice that they had termed Projects 2025. |
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02:18
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This was extremely right leaning and actually socially very right leaning, which was pretty interesting. And I think what seemed to happen over that period was every time Trump and you know, his crew at that stage didn't quite include Elon Musk yet. |
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02:34
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But you know, as soon as JD Vance was put into that position, that was a Project 2025 pick. It felt as though those guys really felt as though they that they had the reins and by those guys we're talking about Steve Bannon, Vance is obviously a big part of that. But we're this is extreme kind of right wing social policy. |
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02:52
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Now, every single time Trump seemed to advance in the sort of polls, he'd be more and more daring in terms of what he was willing to lead with. And then he, you know, the polls would come off a bit, especially since Kamala Harris started to run against him. And then the policies would become slightly more lenient and you'd hear slightly left from less from Project 2025. |
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03:15
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So I think the really sort of interesting thing is an awful lot was said into that. A lot was also said by Elon Musk in various interviews around quite how America First policy would actually be and what could ultimately end up harming some of Musk's business interests. |
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03:32
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So, you know, I think what we can gauge from what happened into the election was that Trump, the more he feels buoyed by the results. And obviously the election result was much stronger in his favour, particularly in terms of the popular vote than anybody expected. |
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03:49
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Everybody thought there was a ceiling at around 49%. That clearly wasn't the case. He crossed demographics in terms of the people that voted for him. |
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03:57
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So I feel overall he feels very, very buoyed. And therefore one could assume that a lot of the sort of policy that he would talk about at the point at which he felt most buoyed in his election campaign is the type of thing that he might try and implement. Now, the only thing that probably counters that argument is he's now got a lot of of very sort of business focused people in his crew and as part of his funders. |
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04:26
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And therefore maybe some of the sort of more radical Project 2025 America First, super MAGA type policies. It will be much harder to to implement them. If a lot of the sort of tech bros feel as though that might have a hugely detrimental effect on their businesses. |
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04:44
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So, you know, at the same time as trying to slap tariffs on making Europe, trying to buy oil and gas from the states rather than from from Russia et. al., I think you know that that's going to be a difficult position for everybody to hold because that kind of doesn't suit a lot of the tech giants who are his funders. |
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05:07
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So that's just an example maybe of how he'll actually be able to implement what he talks about. But certainly given the sort of that the very strong views he had around America First, this kind of isolation of America and Bannon particularly feels like that is very, very anti globalist. |
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05:29
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You know, he certainly might start to talk a bit more of that. I just feel with the types of people he now has on side, it might be more difficult to implement than perhaps he thought during his campaign. |
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05:44
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We're saying it's. It's interesting what you're saying because when you look at the sort of conflict that erupted around that H1V visa, immigration, the position of the tech industry relative to that visa, and Steve Bannon on the other side, who really was about keeping all foreigners out. |
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06:03
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And how that all played out between those two sort of almost warring factions within the coalition that Trump has around him. And it speaks to that, the fact that there's no one way, there's always limits to any policy. |
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06:17
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So the extremes probably up beyond what is possible to implement when you have, you know, that diversity. |
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06:26
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I think I completely agree. And I think there's another way that he's quite clever in how he plays it. This particularly came out in the sort of 2017-2018 when actually he failed to get any kind of tariffs in place until 2018, but was extremely vocal about this during 2017. |
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06:48
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And in the same way that he's lined up all these empty beds to round up illegal immigrants, you know, he almost gets to a stage where he pushes things far enough to make everybody convinced that he's very serious about it, but he doesn't necessarily follow through. |
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07:05
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So then the kind of big conversation then comes, he needs to show everybody he's serious enough to get them to negotiate with him. And once he's done that, it's just a question of what he actually wants out of the situation. |
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07:21
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I mean, slapping 25% tariffs on on Canada and Mexico as he potentially threatened to in the Q&A last night, it's just, you know, it's very difficult to actually do that straight away. |
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07:34
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You know, he wants that to be done on February the first. It feels difficult for anybody to get that kind of policy through in that sort of short period of time. So, you know, it's I still think there's quite a lot of bluster. He signed I think 30-something executive orders in 2017. |
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07:53
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He's rumoured to be signing 100. Is what he says that the market that there was a rumour of 200 before that. But it's really a question of, you know, if he managed to get three out of 30 done in 2017, you know, whether he's going to sign 100 or 200. Just how relevant is it and what is it really about following through? Or is it about making sure that everybody's very aware of what the ideology is of him and his followers? |
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08:21
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And in terms of, you know, the, these executive orders in his inaugural speech yesterday, is there anything in there that surprised you, something that you think we should pay particular attention to right at this moment? |
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08:33
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Of course, all of it is it's all about we're going to concentrate on this and this and that. There's not a ton of detail in a lot of the, at least the press that I've seen. |
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08:43
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So, what are you looking at right now? What are the things that you're thinking? This is something you definitely should be paying attention to, other than the fact that China did not end up with the tariff or even the threat of a tariff imposed on it. |
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08:57
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So I think that's the that's kind of the interesting thing. And that's the worrying thing potentially about this time is that in 2016, 2017, you had all of these, you know, what were then threats, which weren't actually carried through, many of them weren't. |
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09:15
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And you ended up in a situation where just due to the bureaucracy of getting stuff through, and the fact that potentially the team of people he had at that stage didn't actually know how, you know, how Washington operates. And that's something that maybe he's starting to fix this time. |
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09:35
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But you know, I think that the point is very clear and it's something around MAGA, which is it's about an ideology. It's not, it's not necessarily about things that are happening. It's about lots of threats and ideology and bluster. |
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09:53
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Now the question is this time when you've got Musk, when you've got the rest of the tech Bros, when you've got Bannon, recently released Bannon, you know, is there a chance that some of the things that we thought were just bluster, this kind of this kind of anti woke movement, do some of these things end up actually happening? Or at the moment when they do happen, will they be so unpopular? Because that's really what he doesn't want is to be unpopular. |
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10:20
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Will they be so unpopular with some of his voters and some of his funders that he can't actually get them through? I think last night, one of the things that was sort of maybe slightly worrying for me, um, was that in his inauguration in 2017, it sort of still felt like nobody really knew what they were doing, right? |
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10:41
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And so they were, that they'd got this position, you know, slightly like Johnson and post Brexit, you know, that they didn't think this was ever really going to happen. And I feel now as though what happened yesterday was extremely scripted, where it was held, how everybody sat, the people he had sitting behind him were handpicked. |
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11:04
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And he read, you know, Trump's very normally, very free speaking. He loves to just go with the flow. He read pretty much entirely from the prompter. |
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11:14
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And I find he didn't obviously in the Q&A. But before that, I find this a little bit worrying in that maybe he's more organised this time. So I wouldn't say there was anything in particular that he said that worried me. |
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11:27
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Most of it had been said before, but it worried me how organised he was this time. So I mean, when I say worried, I mean you know, potentially what's very, very good for markets, you know, in terms of in terms of reduction in a lot of red tape potentially we'll see the other problems occurring in terms of global trade. |
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11:53
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Yeah. So just to maybe look at what happened to compare markets in 2016/2017 to what we might see in 2024-25 markets in 2016, they tried to they, they got themselves into this reflation trade mood where we saw treasury's move, treasury yields moved a bit higher, we saw the big dollar move a bit higher. |
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12:18
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Mexico was particularly badly affected because his rhetoric around around that had been so strong into the election. Dollar Mex moved probably 6 or 7% higher into the inauguration and then over the next year came off by about 14%. |
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12:36
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So I think the interesting thing is that most of what he talked about in 2016 into the election, they weren't actually able to put into practice. But I think this time potentially the worrying thing is that they do have the sort of the means to do it. Not just in terms of the big kind of financial backers they have, but also in terms of maybe picking people that fall for Trump's team. |
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13:08
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That that's maybe a little bit more tactical than it was in 2016/2017 when it almost felt slightly like a surprise that he had won. So I think the thing to look at is how much positioning has gone into the market into this inauguration that we saw last night. And I think one of the big positions that's been held has been short treasuries. |
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13:35
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We've seen that curve TV10 has steepened a lot. It feels odd that you'd have such such a steep curve in an environment where real rates are still positive. But I think, you know, the economy's been performing pretty well. And if we do see some kind of fiscal slippage maybe at the back end, you know, there's there's every chance that we'll see those kind of higher rates. |
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14:02
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Tom, I just wanna go back a little bit to like a discussion just around the coalition itself, right? Um, you spoke about, you know, looking at the Trump team this time around, looking at who's around Trump, it was interesting how you had the fight between, say, the Steve Bannon America First crew and the business side. |
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14:23
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You see a lot more business people, especially new economy type of business people around Trump this time around, most of whom actually came in pretty late. It's only once they could see that there was momentum that they clamped on. You know, Elon Musk himself was actually on the other side of the aisle at the last election. |
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14:43
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He seems to have sort of come to this story strong, but still quite late in terms of joining the Mara, the MAGA coalition. And maybe that speaks to why there is a little bit of backtracking and softening on some of the more radical issues. |
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15:00
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How do you think, you know, that that composition of that coalition? On the one hand, it maybe means it's more effective, but also it might mean there's a little bit of a change in emphasis and that creates a certain amount of uncertainty. |
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15:16
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Maybe on the positive side, as opposed to it being more bad things can happen, but maybe it means less bad things can happen. |
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15:23
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So I mean, if we think about if we think about what Trump represents and we think about what sort of standard Republican ideologies are, and then we think about maybe what, what both the the tech community wants and the business community and what Steve Bannon and crew want. |
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15:46
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So most conservative sort of mid right politics is around certainly in the last few years until Trump and Johnson is around this idea of ideologically that they're socially quite progressive, but fiscally they're they're quite prudent. |
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16:08
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And I think there's that was the big issue Trump had with a lot of people in the Republican Party, because actually the Project 2025, the main focus of it is not necessarily around the fiscal. It's around becoming socially much, much more conservative. And I think that's fine. |
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16:28
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That doesn't suit the ideologies, I don't think or that certainly isn't the way that somebody like Elon Musk would have presented himself maybe five years ago. |
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16:40
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And certainly the sort of the fiscal side of things is something that, you know, it is really against what the sort of middle of the road conservative and Wall Street actually wants. |
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16:53
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So you, as you point out, you've got all these real opposing forces, you've got business who is very happy with the sort of change in regulation potentially giving them some sort of boost, but then fairly unhappy with what they're going to do to, to global trade. |
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17:11
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Potentially. You've got the street, which is kind of happy with what they're doing in terms of regulation, but less happy with what potentially the sort of fiscal slippage might do to bond yields. |
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17:26
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So they're kind of selling that, but then, you know, it's difficult if you've got these these kind of two backers, both of whom take one part of what you want to do very seriously, but are quite opposed to the other part, right? |
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17:41
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So it feels to me, certainly from just looking at who turned up last night, it feels to me as though that the tech bros are winning. And maybe we're just in a situation where money talks. |
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17:54
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And actually people like JD Vance will have to maybe backtrack a little bit on some of the very socially conservative policies that they've talked about in the past. And certainly a lot of the stuff it's written in the 1 000 page document around Project 2025. |
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18:11
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You know, it's going to be very, very hard to get some of that through, you know, if you still want the likes of Tim Cook to turn up to you inauguration. And I didn't read the whole thing. |
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18:24
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I read bits and pieces. Bits and pieces and summaries. It's very weird. It's halfway through. You might feel as though you're in a dream. It's a kind of odd, but yes, no, they again, you know, to that point, if they didn't have a plan in 2016/2017, they had a real plan this time and that's kind of the scary part of it. |
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18:46
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But that plan looks like it's less likely to be implemented kind of the way it's put together. I suppose that's that's real politic. Right. Absolutely no. |
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18:56
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Absolutely. And and then while we're talking about this uncertainty around what could happen, what are your thoughts on the Fed? Because Donald Trump has had quite strong views around what the Fed should or shouldn't do. |
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19:09
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We know that, you know, expectations around monetary policy have become less dovish. The Fed is expected to cut less partly as a result of Donald Trump himself being elected. So how do you think that conversation goes? |
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19:23
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Do you think there's likely to be more interference with the Fed? And how should we be thinking about interest rates in that context and the stability of the global financial system more broadly? |
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19:34
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I suppose the just to start with markets because at least we know where they are and what they've done. |
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19:42
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We had well over 100 base points I think at one stage at about 150 basis points of cuts priced in for last year. And going into this year, we've had some cuts, but we actually dialled that back to only 25 basis points of cuts priced in for for the US in 2025 with some of the sort of the slight unwind in terms of language that there will be tariffs, we're not sure when. |
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20:15
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There are other ways of sorting this out with people just buying, you know, changing up, basically changing our terms of trade with different countries. |
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20:25
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That's that's kind of softened it a bit. And we're now looking at maybe 35 to 40 basis points of cuts this year. It doesn't seem like very much to me, given where real rates are and given how steep the sort of the curve is. |
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20:39
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I think if we don't start to see big follow through in the next three months, I imagine we'll have to put most of those cuts back in. I suppose the other big concern is if some of these policies are implemented, what is the actual effect of cutting huge numbers of government jobs? |
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21:01
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You know, if DOGE or dodge or whatever we're calling it they're able to, if they're able to follow through with what they've talked about, I'm not sure where that leaves growth, where what that makes some of these numbers look like. I think that could make markets very nervous. |
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21:18
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And I think if you've got kind of nervous markets or even a bit more of a sell off in stocks, potentially you've got this kind of high real rate. You've got you've got jobs that still look okay, but you know, we're definitely the next move for unemployment is going to be up. |
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21:36
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It just feels as though he could, it doesn't feel as though there's enough priced in to say the one year, one year part of the of the dollar curve. I think it's unlikely that we're able to sustain this level of high real rates in the US for a long period of time. |
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21:53
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And even if we end up in this situation where we start to see inflation move a bit for, you know, sort of supply side factors, whatever we're seeing going on in terms of geopolitics, it feels as though all of this is going to be short lived. Inflation to me is it's a sine wave around the level at which the central bank tells you they want it. |
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22:15
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Now, if we've been up to 9 and a half percent headline CPI in the US over the last two years, for me, at some stage this has to unwind. It's just a question of the the sort of other influences that we've seen come in. |
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22:30
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Now it's just a question of how long this kind of lasts for and how long changes in prices due to sort of administered factors, how long that supports inflation and how long how long people are willing to just keep watching that happen at maybe the expense of an economy that won't grow quite as we expected it to, I mean. |
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22:52
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We the US economy has consistently surprised us the upside. And in fact, I think the first sort of like wave of upside surprise and the US growth outcome was in 2017/2018, partly because of the policies that Trump took at the time. And now we've had 2020. |
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23:10
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I think '23 it was stronger than we expected. '24 it was stronger than we expected, you know, '25 obviously that's why we all are you like, okay, there is you should expect some cyclicality to manifest, but it just seems to be bulletproof. |
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23:25
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And now you've got an administration coming in with a president who is very, very pro growth and how do you think about how that, how that constrains maybe what Trump decides to do? But there might be an underlying, like you said, cycle at play that really he can't defy this time around. |
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23:45
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But it's so difficult to be married to a view that ohh, there is a cyclicality. Inflation has to go up. Growth like should slow down somewhat because we've just been so wrong for so long. |
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23:57
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I think that's a very good point. And that's, you know, some of the most beautiful things about economics is you pull one string and suddenly another one moves, right? So, yeah, I think that at the same time that Trump would love to show that he's on top of immigration and you know, with the 200 or 300,000 beds he's got sitting waiting for people to be rounded up and sent home. |
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24:21
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It it would be interesting to see what effect that has on the economy. It would be interesting to see whether you see an initial sort of rise in wages because it, I imagine it will be more expensive to employ other people into some of these jobs legally then it will be to have somebody working cash in hand for you. |
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24:41
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So, I think there potentially could be some quite unintended consequences of what's going on. And I think the other problem is that, we haven't really seen this before. So we're not sure what what should happen. |
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24:56
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And I suppose maybe on the other side of this is, he ended up with a fair few Hispanic voters. And I know he likes to make the big division between legal and illegal. But I'd imagine there are there are quite a few families over there where the first person potentially has now got their documents together. |
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25:14
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But there is still some people waiting for them. And I think it will be very interesting to see how this plays out. I think if he goes too hard, I think this could have an effect on the economy. |
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25:25
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And I certainly think what he doesn't want is to lose his support base. He sees his success as, you know, where the S&P is and where his popularity is in terms of his supporters. So I think that's going to be very interesting to watch. |
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25:41
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Yeah. So, markets themselves, like as usual are constraining, I suppose impact, because the markets will tell you what you can do once you've pushed it too far, they'll tell you that you've pushed it too far. And in a sense, I suppose it's like a correcting mechanism in the system. |
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25:56
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I mean, that's maybe one of the things I feel about sort of US inflation and US rates is, we had all of this priced in last year that we were going to see much deeper cuts. And then we got better jobs numbers repeatedly. And we had great sort of very intentional reference from the Fed around the fact that they were looking at jobs and if jobs weren't going to roll over, then they couldn't really get started on this deep cutting cycle. |
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26:22
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So I think that you then gotta say if the next thing that kept rates higher was the possibility of Trump and you know, the 10-year yield would trade up and down with Trump's popularity, then what happens if now we actually, you know, we've bought the rumour and now we see the fact. |
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26:43
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And the fact is that of the 100 executive orders, he, you know, has signed instantaneously, you know, 50 are at best, slightly possible. And of those to actually get over the line, you're gonna get 10. I think a lot of this is gonna have to unwind into this year. |
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27:02
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I think positioning in certain things, short treasuries, long dollar-yen positioning is, you know, at extremes here. And there's been a bit of an unwind into the inauguration over the, over the December. Sorry, mainly in January, but I think there's a, there's a strong story that no matter what is said, you might get some volatility, but actually the path for the dollar now is going to be lower for the rest of this year. |
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27:34
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Because that brings us back then, to dollar-rand, our favourite. |
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27:38
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Ohh favourites. |
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27:39
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What we obsess about all day everyday, right? So we spoke a lot about the dollar and all those other things. So how did, what's the read through from this into dollar-rand? |
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27:46
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So I I was surprised that dollar-rand had such a move higher both over the election where it underperformed mex in that two week. It underperformed a lot of currencies that were supposed to perform poorly on a Trump victory. |
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28:05
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Much of that, I think, was to do with the fact that a lot of risk had been taken off the books, but people considered rand to potentially still be a pretty good story. We certainly have thought it's been a good story over the last 12 months. |
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28:20
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And so people left some of that risk on their books at the expense of taking off some of their Mexican risk or even actually shorting the pay. So, I think what happened over the election was just the result of people having to stop out of positions that they'd kind of lazy positions that they may have left on over the election thinking that, actually on a Trump victory of all the emerging market currencies, that the rand would probably be the least affected. |
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28:46
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I think since then, what's interesting in the move that we saw over the December. Where we saw dollar-rand move quite a lot higher, but we didn't necessarily see the same follow through in SA rates, particularly in the front end of the curve. |
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29:00
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Bonds sold off a bit, but probably not as much as they should have done given that the rand traded quite a bit above 19. I think that talked to me as though people were currency hedging or kind of proxy hedging with the currency and the assets that they held without actually getting rid of the underlying assets. |
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29:21
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Now to me that talks to that's kind of management of risk over this. Without actually wanting to change their medium term view that South Africa is still quite a good story. The bond curve is too steep, real rates are very, very high. The currency looks as though it can perform. |
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29:39
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So in that scenario, and even now, you know, since we've been back, you get these moves lower in dollar-rand, and it sort of holds the round holds on to its gains. If you look at what's happening in US rates or even SA rates, we're not seeing them hold onto their gains in the same way that the currency is. So, my feeling is that it was overdone in December and we're probably seeing some kind of pullback. |
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30:07
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I still expect the rand to perform pretty well over the next 12 months. You know, all things locally, politically, being equal. |
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30:15
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I mean, Tommy, you raised two issues. I think that that need to actually be expanded on a little bit. One is around your view that a lot of people take a position of and assets and then they'll have a view on the rand or another position on the currency or one that changes quite a bit on the currency. |
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30:31
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Which brings us back to, I mean, one of the things that we've discussed ad nauseam this year, I think even the actually from 2023 onwards, which is that the Rec 28 and holdings of South Africa asset managers offshore and how that changes how dollar-rend actually trades. |
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30:49
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And I think you, you know, that's one of the things that I'd like for you to speak a little bit about because I think there's a fundamental change in how dollar entries that, you know, maybe sometimes is under-appreciated. |
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31:04
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You're completely right. I think the it's very easy to see on a chart since the total or the relative amount of offshore holdings of your assets under management has changed, the volatility of the currency has has become much lower. |
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31:23
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So we've seen this decrease in both skew, so the cost of calls over put and we've seen this decrease in at the money volatility as well. So just to explain how this has worked, as a lot of asset managers and money managers have taken their cash offshore and are now invested in offshore assets. |
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31:47
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That has got up to the level we're at now in, in rate 28 at 45% and many of them are very close to that kind of level. So they're targeting kind of 40. But if you see a sell off in the rand then obviously that number gets much larger. Now above 45% they have to bring cash back onshore. |
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32:07
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So, what we've ended up with is a position where, effectively the local asset management community are quite long dollar-rand. So every single time we get a move higher, they're having to repatriate some of those dollars. Now this puts this natural dampener on the currency and every time we see these spikes it the rand tends to come back fairly quickly. |
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32:33
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If we think about what would have happened in 2017/2018 where instead of the market having this kind of positive gamma profile, we almost have this negative gamma profile. So we've got these local assets that are not currency hedged and as dollar-rand blows out, people decide to currency hedge them. So as dollar-rand's going up, they're having to buy more. |
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32:53
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Currently, we're in a situation where as dollar-rand goes up, many local investors actually have to sell more. So, I suppose that this also talks to this rather positive story for the currency is that you've got very high real rates, you've got a very well respected financial system and central bank who are known for being particularly prudent or the market feels they're very prudent, certainly compared to some of their counterparts at other emerging market central banks. |
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33:24
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You know, all of this speaks to and you've got this currency that can't really sell off. Now the currency can't sell off. So even though we've got a very low pass through into inflation, it can't really get much bigger because the currency simply can't sell off. |
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33:39
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So we've got this sort of benign inflation story with high real rates, this very steep bond curve and this undervalued currency. |
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33:47
|
The story feels very good to me, particularly given that we can't, it's gonna be hard for us to have the same kind of sell off in dollar-rand now as we might have had sort of five years ago. |
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34:00
|
And I mean over and over and above that you've got the structural reform story, which is like carrying on apace. The GNU looks stable. No one's worrying about that anymore. |
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34:10
|
You've seen outlook changes from rating agencies, admittedly from a very low base, but it's still a positive, positive story though. So the momentum is still positive. If you look at foreign holdings of South African assets, they still very, very low. So, it's not like there's positioning where people are very long rand assets. |
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34:30
|
So there's all these things that still stack up and there's still quite positive in spite, you know, of what is going on offshore. Obviously offshore is the bigger 'can be' in the short term, the bigger story, but it looks like the South Africa story at least remains quite solid. |
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34:46
|
I also absolutely and to maybe add to that, you've got this kind of overdone rand in terms of its weakening over December and possibly maybe we're getting close to the market being as bearish as it can get on China. |
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35:00
|
And I think that plays a big part that's that's been a, you know, we're very linked to that story all the time and I think the market got itself very bearish. So I think it feels as though that even if you don't love the South Africa story yet and you need, you want to see more reform before you, before you get involved, just from a sort of valuation perspective, it still seems very good value to me. |
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35:27
|
Yeah. And I mean we're looking for growth just South of 2% for and we've had growth sub one for quite a while as well. So that is another, that's another factor. So, I think we've spoken quite a bit about rand and where we're thinking about that. |
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35:44
|
But I mean, we're in the Trump era. There's a lot of volatility, there's a lot going on. I mean, the only thing I can say without question is, we now know less about what's going to happen than we knew like a year ago. |
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35:57
|
So if we'd had a Kamala Harris administration, they, it would definitely feel like there was a lot more certainty, at least a lot more policy certainty than what we're dealing with now. And as as a, as a final sort of question, I mean uncertainty brings with it volatility and volatility brings with it opportunity. |
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36:15
|
So where do you think the opportunity set sets here? |
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36:18
|
So that's very interesting. So I would say what one of the, what's been priced in, is that there's going to be a lot of uncertainty. So actually the spread between implied volume realised full and a lot of these markets, it is still quite wide. |
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36:35
|
And I think people were very nervous of what this Trump administration can do in the sort of coming few weeks. And I think we're gonna have to watch that play out now if we start to see this becomes a lot more led by the sort of the tech bros. |
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36:51
|
And then I think we're going to have to assume that actually things are not going to be quite as bad as we thought. And I think the biggest sell is probably going to be bull. I think it's going to be very difficult for dollar-rand to sell off. |
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37:08
|
And with that, I think the opportunity is probably to sit on these kind of longer carry type positions into this year with things like, you know, running bonds down the curve. I think the packs probably going to tighten even more. I think the currency can do pretty well. |
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37:31
|
I think we might see implied Val actually even underperformed. Sorry, realised full underperform implied full even at these low levels. I think that there's going to be a move lower in the dollar, but I think it's gonna be very slow and I think we'll probably end the year, in my opinion, closer to 17 than we are now. |
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37:53
|
But I think we, there's a possibility of of some real kind of moves in other markets, potentially a China de-val. All of these things are going to have an effect on the rand, but it's going to be dulled by the fact that we've got this Reg 28 in place. |
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38:11
|
And actually things in South Africa are looking pretty underpriced before all of this starts. So yeah, I think the opportunity this year is probably for things to actually do better under Trump for emerging markets than maybe it's been priced in. |
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38:27
|
Certainly I think with something like Dollar Mex at these levels, again, you know if it did 14 to 16% in 2017, wouldn't surprise me to see it do half that this year. |
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38:38
|
Thank you very much, Tom for that. It's a very insightful discussion. |
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38:42
|
Thanks for having me on. |
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38:43
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Yeah, until next time. |
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38:44
|
Great. Cheers. |
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38:45
|
Cheers. |
