Could US policies and debt issues spur volatility?
March 07, 2025
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1 min read
Gateway market perspective
Market volatility experts from Gateway Investment Advisers, specialists in options-based investment strategies, examine key volatility trends each month and risk management ideas to help investors stay invested for the long run.
January 2025 highlights:
- The Trump administration and some of its policies, such as tariffs and tax cuts, could spur inflation and market volatility in the year ahead.
- The futures curve for the Cboe Volatility Index® (VIX®) suggests implied volatility will climb through July before flattening through October.
- US federal debt as a percentage of GDP is a concern and ranged from 87% to 107% between January 2010 and March 2020. Meanwhile, interest expense has more than doubled from $508 billion annually (as of September 2020) to $1.12 trillion annually (as of December 2024).
- These issues have many economists questioning the financial positioning of the federal government and whether higher federal deficits boost the neutral interest rate in the economy.
- Should fiscal dominance come to fruition and pressure longer-term rates, prospects could be daunting for fixed income investors, and those using longer dated bonds may have limited upside potential.
- Additionally, if inflation concerns come to fruition with current high-equity valuations, the stock market may also face headwinds.
- Gateway’s low-volatility equity strategies may complement traditional 60/40 portfolios and can help investors navigate uncharted markets while benefiting from periods of volatility.
