JSE Index Faces Pressure Amid Global Uncertainty, Fed Pause, and Political Risks

JSE FTSE All Share Index (JALSH) closed down 0.03% at 92,004.15 ZAR on Wednesday. Investors are navigating a tough environment with global uncertainty, domestic political instability and rising geopolitical risks. South African markets are subdued as global issues are impacting short and long term investment strategies.

US Federal Reserve’s Pause Fuels Global Slowdown Fears

One of the key factors weighing on global markets is the US Federal Reserve’s stance on interest rates. The Fed is expected to pause further rate hikes due to concerns about the US economy. In Q1 2025 the US economy contracted by 0.3% mainly due to a 4.8% drop in net exports. While this is seen as a temporary downturn, it has sparked fears of a prolonged slowdown. This is particularly unsettling for emerging markets like South Africa where foreign investment is sensitive to US economic signals.

Despite this, markets have welcomed the prospect of US-China trade talks which could ease some of the tension around the tariff threats. But risk-off sentiment is still weighing on the JSE as investors are hesitant to commit to riskier assets.

Political and Geopolitical Risks Add to Market Volatility

South Africa’s domestic political landscape is also a source of market unease. Tensions within the Government of National Unity (GNU) between the ANC and DA have raised questions about policy stability. Disputes over national budget allocations and proposed VAT hikes have further eroded investor confidence. With the revised budget due on May 21, investors are getting anxious about the government’s ability to deliver on economic reforms.

And adding to this is the geopolitical risks. A recent flare up between India and Pakistan including the downing of planes and capture of soldiers has increased market volatility. Given the nuclear capabilities of both countries this is a global risk and investors are flocking to safe havens.

JSE Technical Analysis

The South Africa JSE Top 40 Index (SA40) is trading around 84,290 testing the 50-period Exponential Moving Average (EMA) at 83,621. This level has been a solid base for the current uptrend since early April. However a bearish MACD crossover is suggesting a slowdown in the bullish momentum and a short term correction is possible.

To confirm a breakout the index needs to clear the immediate resistance at 85,244 which could open the door to the next target at 86,495. On the downside a drop below 83,621 could take the market to 82,882.

Trade Setup:

• Buy Above: 85,250 (Breakout Confirmation)

• Stop Loss: 83,620 (Below Key EMA Support)

• Take Profit: 86,495 (Next Resistance)

Watch for a breakout above 85,244 to confirm the momentum, a drop below 83,621 could be a trend reversal.

Key Points:

• Global Uncertainty: The JSE is facing multiple headwinds from a US economic slowdown, a cautious Federal Reserve and international trade tensions.

• Political Instability: Local political disagreements over fiscal policies are further eroding investor confidence.

• Geopolitical Risks: Rising tensions between India and Pakistan are adding to global market volatility.

In summary the JSE is under pressure and navigating through global and local risks. Until clarity emerges on US monetary policy and domestic political reforms South African equities will be sensitive to global sentiment.