Investing.com -- At Barclays’ 2025 Global Macro (BCBA: BMAm ) & Inflation Conference, investors and analysts discussed the evolving landscape of macroeconomic trends, policy shifts, and financial market risks.
While a broad range of issues were debated, three key themes stood out as the most widely held consensus views among macro investors.
A prevailing view at the conference was that the United States would maintain its economic dominance through 2025.
Investors broadly agreed that strong employment levels, resilient corporate and household balance sheets, and post-pandemic wealth accumulation would keep the U.S. economy on solid footing despite challenges posed by higher-for-longer interest rates.
The belief in U.S. economic resilience was reinforced by comparisons with other major economies. The eurozone was seen as struggling with structural stagnation, weak manufacturing, and political fragmentation, while concerns over China focused on its property sector downturn and deflationary risks.
With global uncertainty persisting, the U.S. was widely viewed as the key driver of economic growth in the near term.
For financial markets, this confidence in U.S. exceptionalism was seen as a reason to maintain exposure to U.S. risk assets, even at historically high valuations.
However, some investors cautioned that this widely accepted narrative could lead to crowded positions in U.S. equities, raising the risk of volatility if sentiment shifts.
The potential economic impact of former President Donald Trump’s trade, tax, and immigration policies was another widely debated topic.
The consensus among investors was that these policies would be broadly reflationary, reversing previous expectations of cooling inflation.
Tariffs were a particular concern. Investors expected that Trump’s trade policies would not merely be rhetorical but would translate into tangible tariffs, likely keeping U.S. core inflation steady or pushing it higher through the end of 2025.
This marked a stark shift from last year’s consensus, when 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 fuel inflation further.
While lower corporate taxes might boost consumer spending, tighter immigration controls were expected to constrain labor supply, potentially driving up wages and cost pressures.
For equity markets, this shift in inflation expectations signaled the potential for increased volatility, particularly if investors begin to perceive that the Federal Reserve is falling behind in its response to rising price pressures.
The final consensus view was that the U.S. fiscal trajectory is worsening, though investors differed on the potential consequences. With tax cuts set to widen the deficit, Treasury issuance is expected to rise, keeping upward pressure on bond yields.
The risk, however, was seen as more related to a price-sensitive investor base demanding higher returns, rather than any immediate threat to the credibility of the U.S. government or Federal Reserve.
While fears of a bond-market “buyer strike” were debated, the consensus view was that higher yields were more a reflection of market pricing adjustments than systemic concerns about U.S. debt sustainability.
For equity markets, the interplay between rising fiscal deficits and Treasury yields could be a big driver of volatility in 2025.
If debt issuance pushes long-term yields higher, it could weigh on equity valuations, particularly in rate-sensitive sectors.