Key takeaways:
2025 outlook: The economic, business and market outlook for this year will be dramatically re-shaped by foundational changes in US policies, business uncertainty and a fundamental reassessment of the US dollar’s preeminent status. Market participants should expect the fundamental strength and momentum from late 2024 to dissipate later this year as recent policy implementation gathers pace.
Fiscal policy: Sovereign fiscal excesses in the US and elsewhere represent an important structural consideration for both borrowers and investors across asset classes. The corresponding reset of term premia may complicate the job of central bankers adding to business and market uncertainty.
Geoeconomic factors: Investors and other economic actors must now incorporate economic statecraft (tariffs, embargoes, sanctions, etc.) into their business forecasting and risk management processes since deployment of these tools has become more widespread and is now broadly embraced by many developed-market governments.
Geopolitics and retreating globalization: The rollout of worldwide tariffs and restrictive immigration policies is expected to reverse the benefits of prior decades’ free flow of labor and goods upon global inflation. This new world order and heightened geopolitical uncertainty has ushered in a new era of potential market volatility as well as a breakdown in traditional asset class correlations.
The effects of turbulence: Elevated volatility, shifting correlations and diminished confidence in the US dollar have put downward pressure on M&A and private equity exits while spurring a pull-forward of debt issuance, a steepening of major sovereign yield curves and a broader embrace of private credit markets.
Opportunities: Although various changes in economic and trade policies have introduced new risks for global investors, a host of new opportunities have also arisen. While systematic, passive and private market strategies continue to proliferate, active management is also experiencing a renaissance of sorts. And the deployment of new AI enablers are equipping investors to synthesize information faster in support of more dynamic portfolio adjustment to heightened changes.
Themed “Decoding Disruptive Markets,” the BNP Paribas 2025 Global Markets Americas conference showcased a packed day of interviews and panel discussions with luminaries—from former White House officials and elder statesmen to seasoned financial practitioners, asset-management executives and academics—who shared perspectives from their remarkable vantage point with more than 550 corporate and institutional clients in attendance.
Our guest experts and panelists discussed their economic and market outlook with the premise that significant change around the world will reduce predictability and threaten many traditional underpinnings, including asset correlations. In the view of guest speakers, policy shifts around global trade combined with discussions of central bank independence and the slowdown of global labour mobility imply elevated fiscal imbalances, forcing upward pressure on long-duration yields over time.
As a consequence, a majority of guest commentators at the conference believe that while the economy is likely to slow and spur some monetary accommodation, the US dollar could underperform further, and traditional correlations may prove unreliable, thereby rendering dynamic portfolio monitoring critical during the second half of 2025, in their view.
We’re witnessing dramatic changes in economic policy and may reach an inflection point presenting the world with a different set ofrisks and opportunities.
Dr. Janet Yellen, Former Secretary of Treasury and Federal Reserve Board Chair
Inflation, labor and growth: more than meets the eye
A consensus view of expert panelists was that the US economy is slowing but is likely to avoid recession if extreme budget deficits and tariff policies are avoided.
One invited speaker believes the US can still avoid a recession but faces headwinds, and stated that markets underappreciate the negative impact of tariffs on inflation and GDP. They highlighted that the free flow of labour and goods worldwide has kept inflation low in previous decades, but elevated tariffs and stricter immigration policies would be inflationary, negating the benefits of globalisation previously taken for granted.
They noted that rising inflation and interest rates—as well as the shadow of uncertainty surrounding trade deals—could stifle growth, or at least be a drag on the economic outlook.
The free flow of labor and goods worldwide has kept inflation low in previous decades, but elevated tariffs and restrictive immigration policies would put upward pressure on prices.
Torsten Slok, Partner and Chief Economist, Apollo Global Management
According to another featured guest, the current labour market is strong and grants leeway to navigate economic uncertainty with the mix of policies needed to sustain growth. Yet she also emphasised the limited picture obtained by looking at discrete snapshots of the labour market at given points in time. She indicated that by looking at the labour market “in motion” through continuous metrics, one can observe a loss of dynamism as reflected in slower hiring and longer attrition cycles.
We’re seeing an acceleration of trade policy—and a transformation of the world’s trade system—that’s unprecedented for such a short period of time.
Everett Eissenstat, Former Deputy Director of the National Economic Council of the United States
Where do tariffs and trade go from here?
Some guest speakers at the conference believe we have hit peak tariffs, but their effect will be felt for a long time, and they will be hard to repeal. They estimate a 10% floor on a universal tariff—one that is here to stay—on top of sectorial tariffs on such industries as pharmaceuticals that would add to the burden.
Once you impose tariffs, it’s politically difficult to roll them back. We believe a 10% universal tariff is here to stay.
Libby Cantrill, Head of Public Policy, PIMCO
They also pointed to the world’s transformation from a system of free trade into more a restrictive system through tariffs creating an environment in which they describe international relations as zero-sum rather than win-win. They stated that the global economy is still designed for the geopolitical environment that emerged in the 1990s and has not caught up with the current state of intensifying geopolitical competition to which it must adapt. They predict that in the near term, tariff rates may rise and fall, but that over the longer run—between 5 to 20 years from now—we may see less economic interdependence between nations.
Our global economy hasn’t yet caught up with the current state of intensifying geopolitical competition to which it must adapt.
Edward Fishman, Columbia University Professor, Former US State Department Policy Planner and Sanctions Lead
The dollar’s decline
One guest speaker noted that the world has realised how dependent it was on the US dollar. He explained that we have witnessed an adjustment (which may continue) in global demand for the dollar, motivated primarily by the desire to diversify holdings with non-US assets. This shift marks a departure from the past two decades, in which the predominant worldwide trade was to purchase US assets, in his opinion.
The possibility of further decline in the US dollar may prompt investors to demand an extra premium for holding Treasurys.
Priya Misra, Fixed Income Portfolio Manager, JPMorgan Asset Management
What is Moody’s downgrade telling us — or not?
One visiting speaker referred to Moody’s recent downgrade of US debt as an understated indicator of the country’s broader underlying debt. He believes that the downgrade itself is a narrow reflection of the probability of default, but it does not capture the scale of the country’s current debt, nor does it reflect the scenario of the US government printing money in response, which in his view would devalue the dollar and raise inflation.
Another guest speaker believes that the Moody’s downgrade also reflects a view on the deadlock in Congress, which reduces the likelihood of a bipartisan agreement on how to bring the budget deficit down, in his opinion.
The significance of US bond-market volatility
April saw extraordinary turbulence in the US bond market that appeared to exhibit symptoms of “a meltdown” that one industry veteran framed in perspective as a tremor—with constructive significance.
He described this tremor as an important awakening to the limits of global demand for US debt, and the trajectory of budget deficits. He noted that it highlighted the need for fiscal reforms, given that the US is not a self-funding nation. And in his view it highlighted a soft spot in the US debt market, which in many ways is deep and robust—yet also frail.
Asset managers’ perspectives
Some asset managers said recent volatility has not fundamentally changed the way they manage portfolios. Volatility, they added, reinforces the notion that people and process lie at the heart of asset management and determine portfolio positioning, thematic focus, consistency of approach and risk management.
The prospect of rising defense spending in Europe could be stimulative to the region’s economies.
Connor Fitzgerald, Fixed Income Portfolio Manager, Wellington Management
A private-asset manager described his practice as a “storage business”—as opposed to a trading business—that seeks to own assets and views market volatility as an opportune time to shop for them at attractive prices.
Recent volatility hasn’t fundamentally changed the way we manage portfolios, which remains grounded in people, process, thematic focus, consistency of approach and risk management.
Brian Barnhurst, Head of Global Credit Research, PGIM Fixed Income
One manager believes current stock valuations are fair, though not a bargain. And another issued an optimistic outlook: He noted the US economy’s resilience in underappreciated ways, having successfully weathered a pandemic and approximately 500 basis points of interest-rate hikes over a multi-year period. And despite April’s acute turbulence in various markets, this manager does not believe the damage amounts to levels that would preclude a compelling investment landscape in 2026.
Active management is back in vogue and may help investors pinpoint opportunities in a broad, diverse and complex market.
Katrina Dudley, Investment Strategist and Portfolio Manager, Franklin Templeton
A change of guard at the Fed
Guest speakers noted that while tariff policies and the looming Federal budget are important near-term market catalysts, the 2026 change in Federal Reserve Board chairmanship looms large for macro investors, global monetary authorities and the rating agencies. Given the prominence of the Fed chair’s role in the US economy, details regarding a changing of the guard generated significant discussion at the conference, and the selection criteria for his replacement were deemed paramount by one seasoned guest expert.
Consequently, said the speaker, adverse market reactions could ensue later this year if a lead candidate emerges who might undermine confidence in the dollar.
Corporate America’s withdrawal amid uncertainty
One guest speaker noted that generally, American companies prefer to move quickly on perceived opportunities rather than be late. Yet the key to such engagement, he explained, is a “run rate” of predictability that enables companies to understand the environment in which they expect to operate, so that they could make strategic decisions about headcount, capital allocations, product offerings, geographic focus and other key matters.
Amid uncertainty, he said, companies tend to withdraw, meaning that they hold off on strategic decisions (rather than simply shrink), spend less, hire less and let natural attrition roll off, since CEOs and corporate boards do not want to be caught overexposed in an unpredictable environment.
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