At Barclays’ 2025 Global Macro (BCBA:BMAm) & Inflation Conference, investors and analysts gathered to discuss macroeconomic trends, policy shifts, and potential risks facing financial markets in the coming years. Among a wide range of topics, three key themes emerged as the most widely shared consensus views among macro investors:
1. U.S. Exceptionalism Remains Intact
A dominant view at the conference was the belief that the U.S. economy would continue to hold its global economic leadership through 2025. Despite challenges posed by persistent higher-for-longer interest rates, investors agreed that factors like strong employment levels, resilient corporate balance sheets, and wealth accumulation post-pandemic would provide a solid foundation for the U.S. economy.
This conviction in U.S. resilience was further bolstered by a comparison to other global economies. The Eurozone faced structural stagnation, weak manufacturing, and political fragmentation, while China’s economy was weighed down by a downturn in its property sector and deflationary risks. In this environment of global uncertainty, the U.S. was considered the key driver of economic growth in the near future.
For financial markets, confidence in U.S. exceptionalism was viewed as a reason to maintain exposure to U.S. risk assets, despite the historically high valuations. However, some investors cautioned that this widespread optimism could lead to overcrowded positions in U.S. equities, heightening the risk of volatility if sentiment shifts.
2. Trump’s Trade and Fiscal Policies Will Be Inflationary
Another hot topic at the conference was the anticipated economic impact of former President Donald Trump’s trade, tax, and immigration policies. The consensus among investors was that these policies would likely be inflationary, challenging previous expectations of cooling inflation.
Tariffs were a significant concern. Analysts forecasted that Trump’s trade policies would not remain rhetorical but would result in tangible tariffs, potentially keeping U.S. core inflation steady or even pushing it higher through the end of 2025. This marked a sharp shift from last year’s view, where many investors had anticipated inflation returning to target levels.
Beyond trade, Trump’s proposed tax cuts and stricter immigration policies were seen as factors that could further fuel inflation. Lower corporate taxes might encourage consumer spending, while tighter immigration controls were expected to constrain the labor supply, driving up wages and increasing cost pressures.
This shift in inflation expectations raised the potential for increased volatility in equity markets, particularly if investors perceive that the Federal Reserve might fall behind in responding to rising price pressures.
3. The U.S. Fiscal Outlook Is Deteriorating
The final consensus view was that the U.S. fiscal trajectory is deteriorating. Tax cuts are expected to increase the fiscal deficit, leading to higher Treasury issuance and sustained upward pressure on bond yields. While investors had differing views on the potential consequences, the concern was less about the credibility of the U.S. government or the Federal Reserve and more about the price-sensitive investor base demanding higher returns.
While some investors debated the risk of a bond market “buyer strike,” the consensus was that higher yields reflected market pricing adjustments rather than systemic concerns about U.S. debt sustainability. This fiscal outlook, paired with rising deficits and higher yields, could drive volatility in equity markets in 2025.
For those tracking the broader economic conditions and how these shifts might influence market performance, the Economic Calendar API can offer valuable insights into key data points influencing financial market risks and trends.