Kevin Lings on markets, monetary policy, and geopolitical risks

Economist Kevin Lings discusses the market impact of Trump's policies, South Africa's conservative monetary approach despite low inflation, and the resilience of global markets amid geopolitical tensions. He advocates for bolder interest rate cuts in South Africa to foster growth and capitalize on rare moments of positive economic sentiment..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..The seventh BizNews Conference, BNC#7, is to be held in Hermanus from March 11 to 13, 2025. The 2025 BizNews Conference is designed to provide an excellent opportunity for members of the BizNews community to interact directly with the keynote speakers, old (and new) friends from previous BNC events – and to interact with members of the BizNews team. Register for BNC#7 here. .Watch here.Listen here.Extended transcript of the interview ___STEADY_PAYWALL___.Bronwyn Nielsen (00:01.407)Kevin, I'm giving up trying to interpret the markets. We've got Bitcoin rallying to all-time highs, gold is also rallying, and the US dollar is stronger. Talk to me about how you are interpreting all these signals right now..Kevin Lings (00:18.679)What's playing out significantly is the expectation of what Trump will introduce once he's inaugurated and what that will mean for the US economy. I think that's the focus. People aren't really considering what could then transpire—for example, how China might react if he introduces tariffs or how other participants might respond. Right now, the focus is entirely on the US implementing a range of measures that benefit itself..There's no doubt that Trump's policies are aimed at benefiting the US, and initially, they will likely have that effect. This, combined with a sense of deregulation, creates an expectation that he will make it easier for cryptocurrencies to operate. The individuals he's appointed to his cabinet seem aligned with his policy framework, so it feels like there's little internal resistance to these initiatives..There's a strong sense that the administration will act quickly. This is not a group seeking to build consensus or get everyone on board before making decisions..Bronwyn Nielsen (01:48.979)Can I ask you—do you hold Bitcoin, Mr. Lings? Do you have a portfolio with Bitcoin exposure?.Kevin Lings (01:57.459)No, I don't. I don't have any Bitcoin whatsoever—to my detriment. It's one of those things. I look at it more from a regulatory perspective. At some point, Bitcoin will pose a problem for major central banks..The US, for example, has spent years enhancing transaction monitoring, increasing transparency, and ensuring tighter control over financial flows to curb illegal activity. Allowing Bitcoin to flourish in this environment feels unsustainable. If it does, the US risks losing control of key initiatives. Under the Trump administration, there may be more leniency, but I'm skeptical this can last long-term..Bronwyn Nielsen (03:06.131)What does all of this mean for the average South African?.Kevin Lings (03:11.357)In the short term, it's good for markets—particularly US equity markets. However, it's not good for bond markets, especially US bonds, nor is it great for global equity markets. Many countries, including those in the Euro area, are expected to come under pressure from Trump's policies..If you're exposed to US equities, this is beneficial. South African equities, however, aren't performing as well. Longer-term, the implications of Trump's policies could stifle global trade, which is critical for global economic growth. The world has become deeply interconnected, and international trade is vital to economic vibrancy..Trump's actions are likely to stifle world trade, hinder growth, and create ripple effects. For South Africa, this means increased uncertainty, potential pressure on imports and exports, and a Federal Reserve that may keep interest rates elevated as it grapples with inflationary concerns..Kevin Lings (05:32.964)We're also likely to see conflicts emerge between the Federal Reserve and the Trump administration regarding their policy agendas..Bronwyn Nielsen (05:38.911)Let's bring this home. We saw a 25 basis point interest rate cut in South Africa last week. South African Reserve Bank Governor Lesetja Kganyago made it clear that 50 basis points wasn't even considered. What do you make of that?.Kevin Lings (06:08.21)It reflects a very cautious approach. I had a call with the Reserve Bank the day after the Monetary Policy Committee meeting, where we could ask questions. Their stance is conservative, aligning with the broader international central banking approach..Inflation is exceptionally low—at 2.8%. The Reserve Bank expects it to remain below 4% over the next six to eight months. Yet, they didn't even consider a 50 basis point cut. This shows their intent to avoid taking risks. They are prioritizing currency stability and maintaining market expectations over taking more aggressive action..Bronwyn Nielsen (07:42.771)But this isn't business as usual. South African consumers are heavily indebted, and businesses, big and small, are struggling. We need growth to create jobs. Where does that factor into the Reserve Bank's thinking?.Kevin Lings (08:07.522)You're absolutely right. When inflation is under control, as it is now, there's room to focus on growth. The Reserve Bank argues that steady rate cuts, currency stability, and low inflation contribute to growth—but could they do more? Absolutely..Emerging markets like Chile have aggressively cut rates, but South Africa remains conservative, even when circumstances justify a more assertive stance. The Reserve Bank places a heavy emphasis on inflation control, often at the expense of growth-focused initiatives..Bronwyn Nielsen (10:09.333)If you were the South African Reserve Bank governor, what would you be doing right now?.Kevin Lings (10:19.871)I would've cut rates more aggressively—50 basis points initially and possibly another 50 basis points. Even with a 100 basis point cut, rates would remain restrictive, not stimulatory. At the outset of rate cuts, you have more room to act decisively, then ease up as you approach your target..We also need to capitalize on positive sentiment in the country, like the optimism following the GNU (Government of National Unity). Such moments are rare, and failing to act on them risks losing momentum. This isn't just about monetary policy but about leveraging confidence to energize the economy..Bronwyn Nielsen (12:42.921)Kevin, before I let you go, what's your view on the current geopolitical environment and how it's affecting markets?.Kevin Lings (12:53.862)The world is coping surprisingly well with significant disruptions, like those in the Middle East and the Russia-Ukraine conflict. For example, the Suez Canal's shipping volumes have dropped significantly due to disruptions, but it hasn't caused widespread price effects or major supply chain issues..Similarly, while these crises pose risks, markets remain focused on Trump's policies. They monitor geopolitical tensions but aren't pricing them into valuations unless something drastic happens..If tensions escalate, particularly around Russia and Ukraine, it could create severe challenges. For now, though, the world economy is handling these risks better than expected..Bronwyn Nielsen (15:09.161)Kevin Lings, Chief Economist at STANLIB, thank you for joining us here on BizNews..Read also:.Kevin Lings unpacks mini-budget: SA's economic path needs urgent action to avoid stagnationWhy a surprise US rate cut is good news for SA stocks, economic growth – Kevin LingsFT: MicroStrategy takes fundraising to $7bn for push into bitcoin

Kevin Lings on markets, monetary policy, and geopolitical risks

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