January 16, 2025—In this week’s DCA Market Pulse, we look at an article from Apollo and offer our opinion on the risk to global markets in 2025.

Apollo’s Risks to Global Markets in 2025

Source: ApolloAcademy.com
 

DCA’s Risks to Global Markets in 2025

1) Tariffs coming: 100% ⬆️

“Tariffs will be implemented,” says DCA Executive Vice President Caroline Chiodo, “but they will be a watered-down version after the administration speaks with corporate CEOs in early 2025.”

The DCA team agrees with Chiodo’s commentary. 
 
2) Nvidia earnings disappoint inflated expectations: 100% ⬆️

“Some of this is already built into its price,” Chiodo says, “as the stock has been fluctuating within a tight range since October 2024.”

The DCA team agrees with Chiodo’s comment, though it expects a significant pullback in share pricing as other chipsets with differing capabilities begin to take precedence. 
 
 3) US economy reaccelerates, and animal spirits come back: 50% ⬇️

“As soon as there is clarity on tariffs, the economy will probably pick up as firms will become confident in spending and hiring plans,” Chiodo believes.

The DCA team believes that monetary policy will also impact the US economy’s performance as 2025 progresses. 
 
4) M&A/IPO activity rebounds: 95% ⬆️

“There are plenty of firms lined up for IPO’s and recent listings have shown there is a solid market appetite (TTAN),” says Chiodo. 

The DCA team agrees with Chiodo’s commentary.  
 
5) Fed stops talking about r-star: 0% ⬇️

“Believe this is part of their new narrative” – Caroline Chiodo 

The DCA team agrees with Chiodo’s commentary. 
 
6) US inflation accelerates in Q1, driven higher by a strong economy, tariffs, restrictions on immigration, and seasonal factors: 10% ⬇️ 

As many in the market have expressed, tariffs will increase the EXPECTATION of inflation, but inflation itself will not accelerate. 

The DCA team suggests that the inflation scenario could be volatile. China’s economic woes could export deflation into the world economy.  
 
7) Fed raises interest rates in 2025: 0% ⬇️ 

“Fed has threaded the needle on its dual mandate of high employment and low inflation,” says Chiodo. “It will not make any moves until there is clarity on the impact from tariffs.”

The DCA team agrees with Chiodo’s commentary. 
 
8) US 10-year interest rates move above 5% before mid-year: 0% ⬇️ 

“0% chance,” Chiodo says. “But if it happens, we are happy to lock in a risk-free rate of 5% for our liquid investments!”
 
9) Probability of a recession in Germany: 75% ⬆️

The DCA team believes that Germany is already in recession. Soaring energy prices could lead to a severe economic contraction.  
 
10) China outright recession in 2025: 0% ⬇️ 

The DCA team believes that China is already in recession, as its interest rates head to 0%. The potentially biggest risks to the world’s economy for 2025 are the economies of China and Germany.    
 
11) Fiscal crisis in the US: 5% ⬇️

“Congress gridlock will be status quo and likely will just have CR to keep government running,” Chiodo believes.

The DCA team, while agreeing with Chiodo on the low probability of a fiscal crisis in the US, believes the percentage could be as high as 25% due to the potential confluence of events with China, Germany, and unresolved conflicts in the Mid-East, and Ukraine. 
 
12) Probability of a US recession: Not zero… ⬆️

The DCA team agrees with Apollo that the probability of recession is low. However, recession risk does exist. A grid-locked US legislature, as well as protracted resistance, both legislatively and physically, could slow economic momentum markedly. 

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