Stagflation? Productivity gains? Global volatility will eventually settle — prepare your portfolio now for any outcome
by Mohamed A. El-Erian
Market Watch
We will all need to muster the resilience to endure prolonged uncertainty.
Although 2025 is not even half over, it is already likely to feature in history books as a year of extreme policy-induced volatility — not only in financial markets but also in terms of economic narratives and international relations. But where it will lead remains to be seen. Are we witnessing the fragmenting of the U.S. domestic and international order, or just a bumpy ride toward a beneficial rewiring of both?
We have already seen the S&P 500 almost drop into a bear market (a decline of 20% from its high), only to regain what it lost. Bond yields have been all over the place, partly owing to a stomach-churningly volatile macroeconomic outlook. The probability of a U.S. recession started the year below 10%, peaked in April at almost 70% and fell below 40% just a month later.