The second quarter of 2025 presented a volatile global landscape, characterised by persistent economic uncertainties, shifting geopolitical dynamics, and financial markets that swung between anxiety and optimism. From global trade shocks and currency shakeups to a volatile gold rally and local political tension, the quarter reminded us that agility isn’t just an advantage — it’s a necessity. In this update, we unpack the key forces shaping the quarter and explore how smart, responsive asset managers found opportunity in the noise.
Global Economic Overview
Inflation remained a central concern globally, though regional experiences varied. On the whole, global inflation trended downward — thanks largely to softer energy prices and slowing demand — but in pockets like the Americas and Asia-Pacific, certain sectors saw renewed price pressures. This divergence prompted differing responses from central banks and stirred mixed signals in investor sentiment. Meanwhile, business and consumer confidence in major economies took a hit early in the quarter, shaken by the initial shock and ongoing ripple effects of US tariffs. Global real GDP growth continued to lose momentum, with 2025 forecasts pointing to a further slowdown from 2024, largely weighed down by rising trade tensions and lingering policy uncertainty.
United States of America
The US economy remained under pressure largely due to an increasingly aggressive trade stance. While inflation showed some signs of cooling, it remained above the Federal Reserve's 2% target. As a result, the Fed held off on further rate cuts during the quarter, following two reductions in 2024. Concerns continued to mount around the broader economic fallout of ongoing tariffs, with both business and consumer sentiment showing signs of strain.
"Liberation Day" and Tariff Announcements (April 2, 2025): President Donald Trump's declaration of April 2 as "Liberation Day" marked aseismic shift in US trade policy. The announcement was accompanied by a sweeping tariff regime, most notably a 25% tariff on all imported vehicles and parts. Framed as a move to revitalise domestic manufacturing and generate significant tariff revenue, the policy sent shockwaves through global markets and signalled a bold, confrontational economic stance.
Ongoing Tariff Dynamics: Following the initial "Liberation Day" shock, the trade landscape remained “fluid” throughout Q2. Tariffs were introduced, paused, or sustained across a range of imports as the US navigated deal-making with various countries. For instance, a 90-day reduction in select US-China tariffs was announced on May 12, offering a temporary reprieve. Still, the broader trend was clear: trade barriers continued to rise. The effective average tariff rate on US imports spiked to approximately 54% shortly after April 2nd before easing to around 21% relative to container load by the end of June. These tariffs drove up costs for businesses and consumers alike, while also fuelling volatility in global container demand throughout the quarter.
USD Dollar Weakness: The dollar had a bruising second quarter, suffering its worst first six months performance since 1973. This sharp decline was driven by the unpredictable and often unfunded US economic policies, which eroded confidence in dollar's traditional role as a global safe-haven. Expectations of further interest rate cuts by the Federal Reserve, combined with growing concerns over the escalating tariffs, also contributed to the dollar's decline against major currencies. As investors looked for stability and better yields abroad, capital flowed out of US assets, reinforcing the bearish sentiment surrounding the embattled greenback.
S&P500: The S&P 500 experienced a turbulent start to the quarter, briefly slipping into bear market territory in early April as investors reacted to the shock of “Liberation Day” tariffs. What followed was are markable rebound: the index rallied nearly 11% during the quarter, closing June on a new all-time high. This recovery was driven largely by robust earnings from large technology companies and growing investor optimism around potential tax cuts. Estimated S&P 500 earnings growth for Q2 2025 was around 5%.
Nasdaq: The Nasdaq Composite also saw a significant rebound in Q2, overcoming a rocky start. Following a modest 0.7% decline in April, which masked violent volatility and a 13.8% intra-month drawdown, the index roared back with an11.7% total return across May and June. This marked its best two-month return since December 2023. Profitable tech giants led the charge, but even less established, unprofitable firms rode the wave of investor optimism, highlighting the sector's broad-based recovery.
Gold Price: The gold market continued its impressive climb in Q22025, building on its record-setting 2024 rally. Prices soared, recording a nearly 25% increase during the first half of 2025, with the metal peaking at$3,499.88 per ounce on April 22 before easing slightly to end the quarter around $3,288.46. This strong performance was fuelled by robust demand amid persistent policy uncertainty, intensifying geopolitical tensions, and a weakening US Dollar. Investor appetite surged, with gold exchange-traded funds (ETFs) seeing renewed inflows, while central banks remained steady buyers—together providing a solid foundation for the metal’s rise.
China's Economy
China's economy continued its deceleration, with GDP growth estimates converging around 4.8%. The economy faced persistent challenges from the lingering aftershocks of post-COVID credit distortions — most notably in the housing sector and among local government financing vehicles(LGFVs) — as well as mounting pressure from retaliatory tariffs. Rather than triggering a sharp contraction, Beijing appeared to be managing a controlled descent, strategically deploying stimulus aimed at bolstering key technology sectors.
The ongoing "tech cold war" further accelerated China’s push towards self-reliance, particularly in high-tech industries. Meanwhile, the yuan came under pressure despite continued effort sunder the BRICS-led de-dollarisation drive. Capital outflows increased as investors searched for higher yields abroad, testing the resilience of China’s financial system. In response, the People's Bank of China (PBoC) largely maintained a steady hand on the currency, holding the USD/CNY fixing around the7.20 level, while allowing for some market-driven movement.
China’s economic slowdown continued to ripple across global markets, posing a risk to emerging market funds — especially those with heavy exposure to Chinese equities. For South Africa, the implications are even more direct. In the absence of any meaningful structural reforms at home, our economy remains heavily reliant on Chinese demand for key exports like iron ore and platinum group metals (PGMs). As China decelerates, so too does the momentum behind one of South Africa’s primary growth engines — underscoring the urgency for economic diversification and resilience.
South Africa
South Africa continues to navigate a complex political territory, as parties within the Government of National Unity (GNU) struggle to reach consensus on the passing of the National Budget. This internal friction is not just a bureaucratic hurdle — it threatens the very stability of the GNU itself. A collapse of this fragile coalition would likely trigger significant volatility across financial markets, with far-reaching consequences for the broader economy and employment. The stakes are high, and the coming weeks will be pivotal.
Inflation and Interest Rates: South Africa saw a more favourable inflation backdrop in Q2 2025, with consumer inflation (CPI) easing to 2.8% year-on-year in May —marking the third straight month below the 3% mark. Combined with slowing economic growth, this prompted the South African Reserve Bank (SARB) to cut interest rates by 25 basis points to 7.25% on May 29. The move, widely anticipated by the market, was aimed at stimulating growth. Policymakers also revised their inflation forecasts downward and signalled a possible long-term shift toward a 3% inflation target — an idea they plan to explore further in upcoming meetings.
JSE(Johannesburg Stock Exchange): The JSE All Share Index's performance in Q2 reflected a complex mix of local political developments and shifting global sentiment. While specific index-wide percentage changes for the quarter were not immediately available, company-specific updates suggested a mixed bag. Companies like SPAR Group delivered stable interim results, and Ninety One Limited saw AUM increase despite net outflows in the first half of their fiscal year, showing some resilience. The SARB’s interest rate cut in May was generally positive for local equities, but overall economic growth pessimism remained. Market sentiment seemed to tread a line between cautious optimism around the GNU’s formation and concern over persistent domestic hurdles.
Navigating Volatility with Purpose
While the quarter was marked by significant geopolitical and economic shifts, particularly concerning US trade policy and the weakening dollar, the strong performance of major equity markets and gold presented substantial opportunities.
Asset management firms that remained flexible, actively adjusted their exposures, and maintained strategic diversification were best positioned to navigate the uncertainty and deliver positive outcomes for clients. The ability to respond quickly to evolving policy dynamics and pinpoint resilient sectors proved essential.
At Mazi, we continue to view volatility not as a threat, but as an opportunity. The dislocations sparked by sudden tariff changes were challenging, yes — but they also opened the door to rebalance portfolios and take advantage of pricing inefficiencies. In a world of constant change, adaptability remains our greatest asset.
