JPMorgan Warns of Market ‘Fog’ as Trade Tensions Cloud 2025 Outlook

JPMorgan’s strategy team, led by Fabio Bassi, expects a challenging second half of 2025 as markets navigate between conflicting forces. On one hand, the U.S. economy faces headwinds from trade policies and a shift away from earlier “exceptionalism” themes toward recession concerns. On the other, underlying economic fundamentals remain solid with limited credit imbalances and controlled inflation impacts from tariffs.

The strategists highlight a puzzling disconnect: volatility measures like the VIX have collapsed while economic policy uncertainty remains elevated, suggesting markets are resilient rather than complacent. They maintain a mixed outlook – bullish on risk assets short-term (supported by AI trends and higher rates), bearish on the dollar, and cautious on gold. The key risk remains a recession scenario where trade wars damage consumer spending enough to force aggressive Fed easing.