As South Africans can tell their American friends, Mr Market is a brutal disciplinarian of political recklessness. When, at the height of state capture, then president Jacob Zuma fired finance minister Nhlanhla Nene in December 2015, replacing him with Des van Rooyen, the response was brutal. Bond yields rocketed 150 basis points, the rand collapsed more than 10% and bank shares lost more than 18%, precipitating a potential financial crisis. Days later, Van Rooyen was removed and replaced with Pravin Gordhan.
Watching the Trump administration’s past few weeks has been evocative of Zuma’s presidency. The playbook is remarkably similar: strip the main investigating agencies, such as the FBI and CIA, of their competent staff. Put sycophants in charge (Elon Musk is a proto Atul Gupta, calling up ministers and issuing instructions, storming into government departments and demanding access to systems, dispatching junior minions into government agencies to do his bidding). The only difference is that Trump’s pace has been blistering. I have always shuddered to think what an Nkosazana Dlamini-Zuma presidency would have been like had she not narrowly lost at that ANC conference in Nasrec.
I suspect Trump will soon encounter Zuma’s main frustration: the courts. His opponents have been given ample material to launch cases, with many of Trump’s actions having no precedent and dubious legality. Zuma was repeatedly humiliated in the courts, from his rape trial to the Constitutional Court judgment that he must pay part of the Nkandla upgrade costs. Of course, Trump has already been humiliated in the courts, but it will soon get much worse. He got out of the starting blocks rapidly, but he will still find himself wading through legal quicksand that could slow his administration to a crawl.
But Trump isn’t easily stopped. He still has many potential obstacles to target. The Treasury is clearly in his sights, with his Department of Government Efficiency (Doge), the Musk Trojan horse, already declaring it has found “irregularities” in payments. That is a pretext for grabbing hold of the payment systems, a move that has been interdicted by the courts. Nenegate represented the Zuma-Guptas’ attempt to grab the reins of spending and control over the economy. Trump is already banging on that door.
The Federal Reserve will be next, reminiscent of Zuma’s attempts to nationalise the SA Reserve Bank. Trump has already bemoaned the Fed’s slow lowering of interest rates. I suspect he has zero respect for the principle of the independence of monetary policy.
And then there are tariffs, a lever Zuma never considered pulling (had the Guptas actually manufactured anything domestically, I’m sure he would have). Tariffs are potentially damaging to the US economy, particularly in triggering inflation. Inflation would lead to interest rate rises, increasing the pressure on the Fed. That is not a pretty picture.
However, Mr Market has so far been twiddling his thumbs. Treasury yields have stepped up a bit, but well within normal bounds. Equity indices have trundled sideways, shrugging off the potential damage to US economic performance. The dollar has held its value. The usual barometer of market fear, the VIX index of implied volatility pricing, has been bumpy but not out of line with historic bounds.
Until Nenegate, SA markets were sanguine too. That event provided an inflection point, a reason for the market to act on its worst fears. Those fears had built while the state-owned enterprises were clearly being corrupted and broad government performance was declining.
My sense is that fears are growing across global markets, but the right inflection point has not yet come. Trump likes to play brinkmanship, threatening counterparts with tariffs and other dire consequences, but backing down before an economically destructive trigger is actually pulled.
Investors also on balance seem to believe Trump remains a business-friendly president who aspires to improve corporate profitability. But there is huge risk of him tripping over his own feet. His response to business fears over tariffs was that they would have to just put up with short-term pain. That indicates he is not fully in thrall to corporate interests.
A real inflection point might well arrive. It could be an attack on the Fed, or the Treasury, or crazy tariffs, or outright collapse of critical economic and fiscal infrastructure under attack from Trump and his allies. That could make Mr Market panic, and the disciplinary market correction could be harsh. Given Trump’s heavy exposure to Wall Street and corporate America’s key decisionmakers, he would find it difficult to resist the judgment of the market.
On the other hand, the Trump administration may be rendered inert by legal warfare, though that would remove the potential upside business is hoping for from a Trump presidency, also not a market positive outcome. It is difficult not to feel now is the time to be risk averse.
• Stuart Theobald is chair of research-led consultancy Krutham.
This article first appeared in Business Day.
