CoreMacro

Although tariffs have receded, they are still high enough to weigh on growth, especially given that underlying economic momentum in the US was weakening going into 2025. The possibility of a fiscal crisis only adds to the risks.

Special Report

It may take several months for the tariff shock and policy uncertainty to filter through the real economy, but survey-based data are already sending a warning. Equities have priced in a lot of good news, and investors are too sanguine about the risk of a US recession.

Although the sell-off in the US dollar and relative outperformance of non-US stocks will pause over the coming months as a global recession begins, the fading of US exceptionalism will still cause the dollar to weaken and US stocks to underperform over a multi-year horizon.

Special Report

Upgrade the odds of a full-scale war in the Taiwan Strait from 5% to 10%. Rapid escalation of US-China economic war raises the probability of tensions spilling into the military-strategic domain. Investors should buy insurance against this tail risk while it is cheap. Meanwhile, use this year’s trade shock and equity volatility to increase allocation to EM manufacturing states.

Barring a dramatic further de-escalation of the trade war, the US and much of the rest of the world will enter a recession over the next few months. Investors should remain defensively positioned for now.

Going into this year, I was by far the most bearish strategist in the Bloomberg survey. A number of clients have reached out to me asking if I plan to change my end-year price of 4450 for the S&P 500 in light of recent events. The answer is “no,” since recent events have unfolded broadly in line with my expectations.

In this Second Quarter Strategy Outlook, we explore the major trends that are set to drive financial markets for the rest of 2025 and beyond.

Special Report

In this Special Report, GeoMacro Strategist Marko Papic argues that the Trump administration is flirting with high risk / low reward. Triggering a recession may be the end goal of the White House, but borrowing costs are not declining as much as they ought to be while President Trump’s political capital is on thin ice. Most recessions are caused by a “murder weapon.” It is rare that this weapon can be holstered. This may be one of those times.

Despite our bearish predisposition towards stocks, we are open-minded to anything that could challenge our thesis. As such, in this report, we review five upside scenarios for equities.