Global markets are expected to continue seeing heightened volatility in the first half of calendar year 2025 as the new US administration under Donald Trump is likely to implement significant policy changes.
“The first couple of quarters will contain more volatility, stemming from the change in US administration and its new policies,” Sanjay Mookim, head of research at JPMorgan India, told NDTV Profit.
Key areas of focus include tariffs, immigration, and deficit reduction, all of which could have substantial global repercussions, he said. “Many of these policies will drive consequences and decisions for other large economies.”
Market participants and policymakers worldwide are adopting a cautious stance, according to Mookim. “The world is in a wait-and-watch mode to see how much of the new administration's promises are executed and the resulting consequences for emerging markets like India,” Mookim explained.
This uncertainty is likely to sustain the volatility, if not increase it, in the initial months of the administration, Mookim said.
Mookim emphasised that the relative performance of equities and currencies is often dictated by growth differentials. “The US economy has enjoyed favourable relative growth dynamics for a long time, outperforming many parts of the world,” he noted.
Looking ahead, Mookim stated that it's unlikely for Asian and European growth to accelerate more than the US in the near term. “In emerging markets, China still dominates, and while there's potential for China to perform well with stimulus, there are many ifs and buts,” he cautioned.
India's growth potential remains a key focus and has now "lumped back with other emerging markets in investors' minds", but the hope and base case is that India can outgrow its EM peers, Mookim said.
Global central banks are likely to turn to rate cuts to drive growth, especially in emerging markets, as per Mookim. "Faced with currency depreciation, slower growth, and deflation risks, many central banks may choose to cut rates, depending on the severity of currency depreciation,” he said.
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