The Stock Market Has Done This Only 2 Times Since 1871 — and Both Times Ended Badly. Could Trump’s Policies Raise the Risk of Another Market Meltdown?
2026-09-06 07:12
•Keith Speights •The Motley Fool
•••••••• • Axe Cap view
Bubble Trouble? What S&P 500 Valuations Mean for JSE Investors
US market extremes echo warnings that matter for South African investors and the rand.
The S&P 500's Shiller CAPE hitting 41 is a red flag few should ignore. Historically, this rare valuation peak—seen only twice since 1871—has foreshadowed sharp market corrections. Trump's trade tensions and military actions have fuelled oil prices, pushing inflation risks higher and forcing the Fed closer to raising interest rates. For South African investors, this scenario adds pressure on the rand (USD/ZAR), which typically weakens in risk-off environments or when US rates rise. Locally, this matters for banks like FirstRand and Standard Bank, whose earnings depend heavily on currency and interest rate stability. Still, unlike previous bubbles, strong corporate earnings globally might delay or soften a downturn. However, if inflation proves sticky and rate hikes intensify, we could see a classic melt-up followed by a painful correction. Watch Sasol too, as surging oil costs could squeeze margins and add volatility. this is just our opinion and not financial advice
Trim big JSE bank holdings to manage rate hike risks and keep a close eye on USD/ZAR — a weaker rand could offer buying opportunities in exporters like AngloGold Ashanti and MTN. Avoid chasing local cyclicals until inflation and rates settle.
- FirstRand
- Standard Bank
- Sasol
- USD/ZAR
- Fed surprises with faster or bigger rate hikes
- Inflation remains persistently above expectations
7/10
The S&P 500 Shiller CAPE ratio has reached 41, its highest level since the dot-com bubble peak, occurring only twice before in 155 years—both times preceding major market downturns. Trump's tariff policies, military actions driving oil prices higher, and Treasury bond strategies are raising inflation concerns and increasing the odds of Fed rate hikes. However, strong corporate earnings growth and different market dynamics may mitigate historical patterns of decline.
Our take is based on reporting first published by The Motley Fool.