In this recap of our conference, we spotlight illuminating insights shared in various sessions throughout the day featuring former government officials, finance veterans, asset-management executives and leaders across business and academia.
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.
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
The forces affecting global and domestic economic policy
The 8th annual Global Markets Americas conference held on May 20 included a broad range of thought leaders who shared insights ranging from strategic and theoretical to tactical and applied. Several high-level discussions—including ones featuring former US Treasury Secretary Janet Yellen and Bridgewater Associates Founder Ray Dalio—covered far-reaching global economic and geopolitical discussions that incorporated views from Wall Street, Washington D.C. and Corporate America to assess business and market catalysts for the year ahead, as well as critical matters for macro investors to consider.
Mr. Dalio pointed to five “big cycles” he believes shape the world in which global macro investors operate, with political and economic consequences: (1) debt cycles; (2) cycles of political and social harmony and conflict within countries that affect such economic policies as taxes and tariffs; (3) cycles of geopolitical harmony and conflict between countries that affect world order, with “winners who determine the rules,” such as what the US has been since World War II; (4) acts of nature such as droughts, floods and pandemics; and (5) the development of major new technologies.
Dalio added that the turning of those cycles can change the world order on multiple levels—from the global monetary system to the way governance works within and between countries. Judging by those cycles, he remarked, we may be on the cusp of a departure from the current world order. He believes there are risks to the US dollar’s status as the world’s reserve currency, though he does not yet discern an adequate replacement, which explains the rally in gold and cryptocurrencies, in his view, and makes the case for alternative forms of money as a source of portfolio diversification.
US Treasury-market volatility in April was a constructive opportunity, according to another speaker, but also a warning sign that elected representatives must heed. He referred to April’s bout of turbulence in Treasurys as a “good” kind of “tremor” that “reminds us to build sturdy buildings,” by which he meant that volatility was an indicator of the limits of global demand for US debt and of budget deficits, but also something that could galvanize the government to enact well-needed fiscal reforms and establish a debt ceiling it wouldn’t cross. One industry veteran believes US debt as a share of GDP should be brought down from its current rate of roughly 6.5% to approximately 3% in order to embark on a more sustainable trajectory.
The Trump administration’s motivation for imposing tariffs, a former official said, was to bring back manufacturing jobs the US lost to destinations of cheaper labor, and to reverse what the administration perceives as the hollowing-out of the American working class. Yet he says that many lost jobs over the years have been regained in other sectors—from services to technology (such as data centers and infrastructure)—resulting in the redeployment of a substantial part of the working class in higher-value jobs and the relatively low unemployment rate we enjoy today. Ultimately, he believes, President Trump’s primary objective is economic prosperity through more jobs, higher wages and greater wealth.
A conversation with Dr. Janet Yellen: reflecting on changes ahead for the Fed and treasury
On the eve of momentous tax legislation, amid global trade negotiations and in the face of rising inflation expectations, former Secretary of Treasury and Federal Reserve Board Chair Janet Yellen shared her invaluable perspective on the policy options available to “thread the needle.” Dr. Yellen also discussed the coming change in the Federal Reserve Board chairmanship in 2026.
Dr. Yellen believes “we’re witnessing dramatic changes in economic policy and may reach an inflection point presenting the world with a different set of risks and opportunities.” In her view, the realignment of geopolitical alliances could affect investors around the world, including in countries with which the US has previously traded but that now feel they can no longer rely on the US as much as they have in the past. On the other hand, “there’s a lot of potential in Europe for improved economic performance,” she said.
Dr. Yellen noted the importance of addressing US fiscal policy challenges to support economic resilience. She noted, however, certain safeguards that were established in the financial system over the past two decades. “Following the 2008 financial crisis, the Fed put in place practices to monitor the financial system in ways it hadn’t done previously to detect systemic risks and prevent them from materializing,” she said.
Economics deep dive: how “America First” is affecting domestic trends and international growth
With stagflation worries rising and the US Federal Reserve seemingly on hold, this panel explored both “hard” and “soft” economic signals most likely to drive markets later this year.
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
One speaker said that by imposing tariffs and trying to reshore manufacturing, the Trump administration seeks to establish the kind of economic independence and self-sufficiency of an autarky. Yet he believes that the protectionist experiment of the 1930s—which saw the Smoot-Hawley Act impose steep US tariffs on more than 20,000 imported goods in an effort to protect domestic industries during the Great Depression—ended up exacerbating the economic downturn by damaging international trade. That period, he said, should serve as a cautionary tale for policymakers pursuing highly protectionist agendas.
This speaker believes that the wielding of significant tariffs amid multilateral trade talks is leading many countries to fear being punished by the US if they don’t strike deals. This fear, he said, could drive worldwide economic and financial hedging on a massive scale, which might lead the euro to chip away at the dollar’s position in reserve allocations and cross-border trade. He also noted that, unlike the Cold War rivalry between the US and former Soviet Union, which were not economically interdependent, today’s tensions between economically dependent countries fan fears and elevate risks.
Still, one speaker believes there are potential tailwinds to growth. In his view, the US administration recognizes the unwanted turbulence triggered by sudden tariffs and seeks to seal trade deals as quickly as possible to stabilize markets, turn the chapter and focus on other domestic priorities, including lower taxes, deregulation and other stimulative measures.
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 geopolitical landscape: change and its implications for trade, growth and markets
This panel highlighted how key economic, trade and military policies proposed by the Trump administration are reshaping business prospects and investment opportunities around the world.
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
Some panelists cautioned against underestimating President Trump’s commitment to upholding tariffs as an ideologically consistent worldview. They believe the US trade deficit is the president’s scorecard of America’s relationship with the rest of the world, and that—whatever the outcome of ongoing trade negotiations—we are entering a secularly high tariff environment. They also foresee Mr. Trump continuing to pursue tariffs in an effort to raise revenue, provide tax relief, reshore US manufacturing and remedy what he perceives as unfair trade practices.
“Businesses will face a more complex landscape of world trade, which will shift from an integrated global system into a more fragmented patch of trade networks—especially in technology,” said Everett Eissenstat, Former Deputy Director of the National Economic Council of the United States.
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
One industry expert believes the recent repricing of the US dollar isn’t necessarily a referendum on its status as the world’s reserve currency for the time being. In her view, the shift away from the dollar is still incremental, and although it “may not look great on an absolute basis,” the dollar is still attractive in relative terms when compared with other currencies. Additionally, she said, there is no reserve-currency alternative for the foreseeable future.
This expert believes corporations will need to navigate uncertainty for now. A number of factors with unknown consequences pose corporate risks and are preoccupying boardrooms, including the large US budget deficit, the recent downgrade of US debt by Moody’s, the dollar’s weakening, high tariffs, potentially high inflation, the prospect of high interest rates and their effect on the yield curve.
Risk asset rebound? Key themes for credit and equity investors
The reshaping of the world’s economic order following the Trump administration’s “Liberation Day” tariff declaration on April 2 brings a host of new fundamentally driven investment opportunities across the equity-credit continuum that this panel discussed.
One speaker believes that investment-process consistency can bring an element of certainty in the effort to weather uncertainty. Consistency, she explained, stems from an enduring persuasion that a particular investment approach would stand the test of time, which makes it a powerful way to confront ambiguity.
This speaker was optimistic about the equity market, and in her view, opportunities will emerge from the sheer breadth of the market. Regarding the tech sector, she doesn’t think the so-called “Magnificent Seven” names (Microsoft, Amazon, Meta, Apple, Alphabet, Nvidia, Tesla) will go down much in collective value as a group in the foreseeable future, but she does believe that the rest of the market will continue to catch up, thanks in part to increased AI usage and its promise of process acceleration.
With that said, she believes that the risks facing those seven stocks are the same as any technology company, including hubris, earnings risk, a security breach and regulatory risks. She also thinks the opportunity set of investments in small caps is still broad but not as expansive as large ones, since smaller companies are more affected by tariffs and less able to advocate for themselves.
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
Another speaker was optimistic about the credit markets. He noted the depth and breadth of the credit markets—as well as the US economy’s persistent strength through the COVID-19 pandemic and a protracted chapter of interest-rate hikes—and does not believe the damage from April’s volatility would deny investors compelling opportunities next year. He added that volatility in the interim could present opportunities to add spread risk to credit portfolios—and that single-B credits and structured products look attractive for picking up extra yield.
One investor believes that private lending—including asset-based finance—is no longer an option of last resort but rather a viable alternative for companies across the credit spectrum. This alternative, he said, has allowed greater access to capital and more opportunities to invest in credit at different parts of a company’s lifecycle. Moreover, he added, increased access to capital has served as a shock absorber and distress mitigator for businesses during recent bouts of volatility. He claimed the private debt market is highly levered for M&A financing following a “euphoric” fourth quarter of 2024 and an active first quarter of 2025, though activity has subsided for the time being amid uncertainty, he said. And this investor believes that sectors and companies without significant free cash flow are most at risk in the current environment.
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
Portfolio managers trade ideas: new views and trades in pursuit of alpha
In the aftermath of April’s de-leveraging of macro, credit and equity markets, this panel of leading fund managers discussed their highest-conviction investment themes and trades for this period of heightened uncertainty.
One speaker noted that the COVID-19 pandemic transferred an enormous part of the US government’s balance sheet to the private sector. In so doing, he believes, it has become the most levered part of the economy—and its debt is therefore the most interest-rate sensitive, which portfolio managers should keep in mind. This speaker set a six-month framework for investing in which he sees stimulative elements in fiscal policy alongside what he views as an unsustainable debt trajectory if it isn’t curbed.
The prospect of rising defense spending in Europe could be stimulative to the region’s economies.
Connor Fitzgerald, Fixed Income Portfolio Manager, Wellington Management
“Many corporates have maintained responsible balance sheets since the pandemic and are continuing to manage leverage and liquidity prudently against continuing uncertainty, which is lowering credit risk for investors,” said Connor Fitzgerald, Fixed Income Portfolio Manager at Wellington Management. He added that the prospect of rising defense spending in Europe could be stimulative to the region’s economies.
“Our base-case scenario for the US is economic growth at a rate that is below potential, primarily because of tariffs—which are effectively a consumption tax—and uncertainty,” said Priya Misra, Fixed Income Portfolio Manager at JPMorgan Asset Management. She added: “Rather than being proactive, the Fed appears to be following a wait-and-see approach, which likely means that it will only respond when data points show up.” Misra also believes that the prospect of further decline in the US dollar may prompt investors to demand an extra premium for holding Treasurys.
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
For more themes and perspectives discussed at the BNP Paribas 2025 Global Markets Conference, refer to this summary.
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