Big Investors Strike a Cautious Tone on Markets for 2025 Amid Risks from Trump Policies and Inflation
As the market continues its bullish run, big investors are sounding a more cautious note about the year ahead, especially given elevated market valuations and potential risks from President Donald Trump’s protectionist policies and inflation.
At the iConnections Global Alts conference in Miami this week, top hedge-fund managers and industry professionals expressed concerns about the economic backdrop. While some reassured investors with a pro-business stance, many warned of potential turbulence in the market, citing uncertainties that could affect both the stock market and broader economic conditions in 2025.
Steve Cohen, founder of Point72 and owner of the Mets, discussed the impact of Trump’s policies, specifically his stance on tariffs and immigration. Cohen believes these policies could stoke inflation and dampen consumer spending, which would likely lead to a rougher second half of the year for the markets. “I don’t think that’s a great backdrop in 2025,” he remarked, predicting that the market might top out soon and become more volatile.
Despite a strong performance from the S&P 500, which saw a second consecutive annual gain above 20%, the market is starting to show signs of volatility. A significant sell-off earlier this week was triggered by a Chinese AI competitor, which caused major losses in Nvidia and other tech stocks.
Karen Karniol-Tambour, co-chief investment officer of Bridgewater, echoed a neutral outlook on the markets, acknowledging the risk of both stronger-than-expected growth and continued inflationary pressures. “It’s not a great time to really lean in and take a ton of risk,” she stated. The uncertainty surrounding policy changes adds a layer of unpredictability that investors must navigate.
Oaktree Capital’s Howard Marks, known for predicting the dot-com bubble, also warned of market psychology influencing short-term volatility. Marks highlighted the recent Nvidia incident as a prime example of irrational market behavior and suggested that high-yield credit might be a safer alternative to equities, offering a more reliable return with less risk. “If you can get low single-digit returns from the S&P 500 with great uncertainty and 7.3% from high-yield bonds contractually, isn’t it better?” Marks questioned.
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