This year, our special square year of 2025 \u2013 twenty-five squared \u2013 has been a tumultuous year of many extreme surprises, including but not limited to everything related to Donald Trump. Some surprises outside of his sphere of influence included horrific fires in a complex of buildings in Hong Kong, ravaging deadly storms in Thailand and catastrophic floods in Pakistan.<\/p>\n\n\n\n
But, putting aside natural disasters, as it pertains to geopolitical events the world over, he has had a say in just about everything. He even had an outsized impact on events he didn’t attend, such as the G20 summit in Johannesburg and the COP30 summit in Brazil.<\/p>\n\n\n\n
But, it is especially at this time of year when we begin to look ahead, rather than behind, that we are tempted to hazard predictions about what the next twelve months may hold. Will the war between Russia and Ukraine come to an end? Unlikely. Moscow will likely hold up for another year. Will the Gaza Strip be transformed into the \u201cPearl of the Mediterranean\u201d? Almost certainly not. The far more probable outcome is that it will continue to be a site of profound human suffering. Will Sudan\u2019s agony of civil war and famine be relieved? Again, probably not. Global attention remains far too limited. Will South Africa take part in the G20 summit in Miami? It seems doubtful. That is, unless Donald Trump can convince Parks Tau to exempt Elon Musk\u2019s Starlink from BEE rules.<\/p>\n\n\n\n
These questions, however, are to some extent \u2013 at least in the short-term horizon of a year \u2013 relatively abstract from a South African perspective. That is, unless your business exports aluminium or any other energy-intensive product offshore, which now faces CBAM (Carbon Border Adjustment Mechanism) tariffs imposed by a blindingly hypocritical Europe or US tariffs imposed by Trump. Or, that is, if \u2013 like me \u2013 you are moderately obsessed with the future of global democracy and the personal freedoms of movement, of expression, and of self-actualisation that we believed for so long had been achieved and were inalienable and self-evident.<\/p>\n\n\n\n
The more compelling question, as far as it pertains to the everyday investor in South Africa, is actually<\/em> a markets question. Will the markets \u2013 and by that I mean primarily the US equity markets and the S&P 500 more specifically \u2013 continue to experience the extraordinary growth that they have in the last two years? From October 2022 to October 2024, the S&P 500 achieved a two-year return of 63.10%, four times greater than the long-run average two-year return of 15.87%. That is radical.<\/p>\n\n\n\n Now, this<\/em> is an interesting question, because, unlike geopolitical forecasts, it\u2019s one that will have an immediate and personal impact on anyone invested in the market, whether it be the South African equity market or in a more diversified global portfolio. Irrespective of how undervalued the South African market may be, when the US markets tank, the rest of the world follows suit. During the Global Financial Crisis, between October 2007 and March 2009, the Dow Jones fell by over 50% and the JSE followed a similar trajectory, losing 46% between May and November 2008, despite having none of the toxic financial instruments that caused the crisis available locally.<\/p>\n\n\n\n The question for 2026 must then<\/em> be: are the markets now perched at unsustainably elevated levels? Will the AI narrative continue to propel them even higher? Or are we approaching a correction \u2013 perhaps even a crash? By this time next year, will we be marvelling at the existence of ten $5 trillion-companies, or will they have all vanished?<\/p>\n\n\n\n In weighing these questions, American economist Nouriel Roubini seems to have momentarily shrugged off his \u201cDr Doom\u201d moniker and adopted an unexpectedly upbeat stance, as reflected in a Financial Times<\/em> article published on 25 November. His optimism was so unexpected that one reader joked he had to check his calendar to make sure it wasn\u2019t April the 1st<\/sup>.<\/p>\n\n\n\n In the article, Roubini rejects the pervasive pessimism about the US\u2019s economic future, which is rooted in concerns about deglobalisation, restrictions on movement, sovereign debt, the Federal Reserve\u2019s independence and an undermining of the rule of law. \u201cThe argument was that American exceptionalism was over,\u201d he writes.<\/p>\n\n\n\n Countering this, Roubini remains extraordinarily optimistic. His confidence rests partly on the view that market discipline, pragmatic advisers, and the independence of the Fed have prevented the most damaging post-election policies from taking hold.<\/p>\n\n\n\n That argument knocked me off my chair.<\/p>\n\n\n\n Market discipline, or more accurately, market reaction<\/em> \u2013 for one can hardly use the word \u201cdiscipline\u201d in the same sentence as Trump \u2013 has not, in fact, reined him in. On the contrary, the once-popular moniker TACO, short for \u201cTrump Always Chickens Out\u201d, first coined to refer to the US president\u2019s approach to trade policy may, according to financial commentator Robert Armstrong, soon be abandoned for \u201cTANCO\u201d \u2013 Trump Absolutely Never Chickens Out \u2013 reigniting trade conflicts with potentially severe consequences. As far as the argument for pragmatic advisors is concerned, I am left speechless.<\/p>\n\n\n\n But these are peripheral to Roubini\u2019s central point, which is that growth will rebound next year, supported mainly by AI-driven investment. To my<\/em> mind, it is precisely this over-investment, bolted only onto a single dominant narrative \u2013 the AI narrative \u2013 that poses the greatest risk to the markets. If even a scintilla of the hysteria for an AI singularity is undermined \u2013 by a further Chinese breakthrough, for example \u2013 then the whole deck of cards may come tumbling down.<\/p>\n\n\n\n It is worth noting that in addition to being a Professor of Economics, Roubini is also a senior advisor at the global investment management firm Hudson Bay Capital. There, he and his colleagues have been conducting research that argues against the use of what they call \u201ccrude\u201d price-to-earnings comparisons to measure market exuberance, proposing an alternative metric of their own making. Replacing the long-standing PE metric, which suggests markets are overstretched, seems awfully convenient. It is, however, a position that will no doubt keep the phones ringing pleasantly over at Hudson Bay Capital.<\/p>\n\n\n\n Armstrong, by contrast, takes a more balanced view, pointing to inflation, policy uncertainty, tech profit margin pressures, and the market\u2019s heavy dependence on Nvidia. Most importantly, he considers the extent to which equity markets have become intertwined with crypto. This development is best exemplified by companies like Strategy, which decided to use all of its capital to buy Bitcoin rather than to channel it into what was formerly its primary business of developing software. Recent events have demonstrated the unsustainability of this model: as crypto prices fell, billions of dollars vanished from crypto-hoarding companies\u2019 market value, with Strategy\u2019s shares dropping 50% over the last three months.<\/p>\n\n\n\n In realising that the markets are almost entirely driven by one narrative, I find solace in siding with Jemima Kelly, the Financial Times<\/em> columnist. Often to her own peril, she persistently eviscerates the crypto bros, the blockchain maniacs, the DeFi evangelists and more recently the AI geeks. Of the recent decline in the crypto market she wrote that this is indicative of \u201ca gradual move away from the era of lol that has defined the years since Trump became president for the first time\u201d. Her argument is that we have, en masse, <\/em>decided to switch our brains off since 2016, content to watch the spectacle unfold. This mindset allowed us to indulge in the free-money experiment, gamble on crypto, worship false gods in the form of blockchain, and now place similar faith in the increasingly fantastical promise of AI. Actually, the entire<\/em> AI narrative can be seen as a derivative of the original crypto\/blockchain narrative. This is what she calls the \u201claugh out loud\u201d generation.<\/p>\n\n\n\n I\u2019m not sure I would call it that, but nevertheless, I remain heavily sceptical. I can make out, from even before the election of Trump in 2016, in fact from even before the Global Financial Crisis, a strong distinct through-line of greed-driven consumerism that has overwhelmed all basic societal values. The engine room for this greed has been inhabited first by the crypto narrative, then by the DeFi narrative and now by the AI narrative.<\/p>\n\n\n\n For 2026, it will surprise me tremendously if the market continues to accept this narrative at face value. In the near term, artificial intelligence is unlikely to deliver the transformative technological leaps that many are eagerly predicting. The returns certainly won\u2019t justify the staggering levels of debt currently being taken on to build the data centres upon which the so-called AI revolution relies. As the mismatch becomes clear, investor confidence will falter and the market will follow.<\/p>\n\n\n\n I’m willing to bet my socks on that. See you next year.<\/p>\n\n\n\n This article is an opinion piece by David Buckham<\/strong>. The views in this article are those of Buckham, and do not represent the views of BusinessTech and its associated companies.<\/em><\/p>\n\n\n\n<\/s><\/p>\n\n\n\n