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Economic Uncertainty Looms as US Policy Shifts
The US economic landscape is preparing for significant changes under the new administration, with potential implications for global markets and investment strategies.
Navigating Economic Challenges
S&P Global Ratings projects the US GDP growth at 2.3% for 2024, with an average annual real GDP growth of 2.0% for 2025 and 2026. However, this projection comes with considerable uncertainty, primarily driven by potential policy changes and anticipated tariff increases against major trading partners like China, Canada, and Mexico.
The proposed tariffs could lead to a one-time consumer price increase in the first 12-18 months, creating additional economic pressure. The Federal Reserve’s monetary policy is also expected to adapt, with forecasts suggesting the federal funds rate could reach 3.5%-3.75% by the end of 2025.
Market Implications and Risk Factors
The changing economic environment presents multiple challenges for investors and businesses. Higher interest rates are likely to increase borrowing costs, particularly affecting speculative investments. Investors may demand higher risk premiums, while borrowers could face difficulties in debt servicing and refinancing.
Beyond policy uncertainties, additional risk factors include geopolitical conflicts, elevated borrowing costs, commercial real estate market challenges, potential cyberattacks, and climate-related physical asset risks. Despite these challenges, the US economy is expected to continue expanding, with corporate default rates anticipated to slow down.
The global implications of these policy decisions extend far beyond US borders. The 2025 election landscape, with less than 15% of the global population voting, still holds potential for market volatility and economic shifts.
While the US economy demonstrates resilience, the anticipated policy changes introduce significant uncertainty. Investors, businesses, and policymakers must remain adaptable and strategic in navigating this complex economic landscape.
