South African investors warned about market shocks

While certain market shocks tend to build up gradually, their effects can hit hard, and South African investors have been warned not to dismiss warning signs.

This is a warning from Webull Securities South Africa CEO Ricardo da Silva, who recently outlined a guide on understanding market shocks.

Da Silva explained that market shocks have become a regular feature of global financial markets, with South African investors caught in the crosswinds. 

“From global trade tensions to local political uncertainty, markets can swing sharply in response to shifting narratives and breaking developments,” he said. 

“Beneath the surface of these market moves are what economists call ‘shocks’; unexpected events that trigger wide-reaching effects across economies and portfolios.”

He said understanding the three different types of shocks – event, cyclical, and structural – is essential for navigating volatility and building a portfolio that can withstand uncertainty.

The first type of shock, event shocks, are sudden surprises that jolt the economic system, forcing a rapid repricing of risk before the full impact is clear. 

Da Silva listed tariffs, wars, pandemics, assassinations, and natural disasters as examples of event shocks. 

Global markets experienced this first-hand in April this year, when United States President Donald Trump announced his so-called ‘Liberation Day’ tariffs.

This announcement saw the Trump administration threaten to impose wide-ranging tariffs on several countries.

In addition to an overall 10% tariff on goods imported into the United States, Trump singled out the “worst offenders” for higher reciprocal tariffs. 

South Africa was among those affected, and it faced an additional 30% tariff. While these tariffs have since been paused, they sent shock waves through the global markets.

Da Silva explained that event shocks like Trump’s tariff announcements can have far-reaching consequences, including disrupting supply chains, fuelling inflation concerns, and shaking investor confidence overnight.

“When such shocks escalate, they can weaken company margins, hurt earnings, and tip markets into a broader downturn,” he said.

“While event shocks are unpredictable, investors can build resilience through diversification, holding cash, or owning defensive assets like government bonds, gold, or consumer staples.”

He added that it is important not to overreact to short-term market noise unless it points to a deeper shift with lasting consequences.

“We’ve seen how quickly markets can rebound once some uncertainty or trade tensions ease. However, that sharp recovery doesn’t mean the uncertainty is gone; it just means it’s changed shape,” he explained.

Cyclical shocks

The second type of shock Da Silva outlined was cyclical shocks, which form part of the market’s natural rhythm. 

“They emerge during phases of economic slowdown, often marked by things like shrinking growth, tighter lending conditions, or a spike in borrowing costs,” he explained. 

He warned that while these shocks tend to build up gradually, their effects can hit hard.

The best example of this came in the 2008 global financial crisis, when subprime debt was not the “event” but rather a symptom of a broader credit cycle unravelling. 

“So, what initially began as cautious investor sentiment or tighter lending set the stage for a much deeper and more widespread collapse,” Da Silva explained.

In the context of Trump’s tariffs, if companies cut back on investment or lay off workers in response, that then results in a trade shock becoming a cyclical one.

Da Silva said this would result in consumer demand dips, a slowed GDP, and increased recession fears.

“Don’t dismiss warning signs. Yield-curve inversions, climbing default rates, and a cooling job market in the US aren’t background noise; they’re early alerts of mounting stress in the system,” he warned.

“While they don’t guarantee an immediate downturn, they do signal the need for caution.”

Structural shocks

The third type of shock, Da Silva explained, was structural shocks, which are less about headlines and more about deep, long-term shifts in how economies function. 

“Think AI, the energy transition, or the rise of the internet. These changes unfold gradually but, once they hit a tipping point, can upend entire industries just as eCommerce disrupted traditional retail,” he said.

Da Silva believes the world is currently living through one of the most significant structural shifts, AI. 

“Since ChatGPT’s launch in late 2022, AI has rapidly moved from concept to reality, transforming industries like finance, law, marketing, and software,” he said. 

“As it evolves, many white-collar roles will be redefined in real time or even eliminated entirely.”

He further explained that structural shocks are often accelerated by other shocks. For example, the Covid-19 pandemic did not create remote work, but cemented it.

“Tariffs may now push firms to rethink supply chains and reshape global trade for years to come,” Da Silva said.

“Unlike event or cyclical shocks, structural changes don’t reverse. They permanently rewrite the rules.”

He said this is why it is critical to track slow-moving forces like regulatory shifts, tech breakthroughs, or demographic trends before they reshape the landscape.

“In a world where the ground beneath our economies can shift overnight or slowly erode beneath our feet, the smartest portfolios aren’t built for predictions. They’re built for resilience,” he said.

He explained that South African investors do not have the luxury of ignoring global tremors or local tremors. However, he added that this is not a drawback but an advantage. 

“Navigating constant noise sharpens your ability to manage uncertainty, turning it into a skill,” he said. 

“In the long run, it’s not the boldest investor who wins. It’s the one who pays attention, adjusts early, and stays in the game.”

“The real question isn’t what the next shock will be but whether your portfolio is built to handle a world in constant flux.”