Panel
Capital Markets 2025: Shaping and Scaling the Future | Global Conference 2025
Milken InstituteSonali Basak, Sumer Dewan, Jim Esposito, Viswas Raghavan, Seema Shah, Jeffrey Solomon
- US fiscal and trade policies under the current administration are expected to drive revenue through tariffs and deregulation, creating a decade of high policy and market volatility as governments attempt to offset tax cuts and manage post-COVID debt transfers.
- While severe US or global recessions are deemed unlikely due to strong corporate and household balance sheets, the business cycle is considered "almost dead," leading to expectations of a slowdown rather than a hard crash.
- The 10-year investment outlook is projected to feature low returns and high volatility, limiting the potential for post-Global Financial Crisis style strong risk asset performance and increasing investor interest in private markets and global diversification.
- The US dollar's status as a global reserve currency is anticipated to face erosion over a 50 to 100-year timeframe if trade imbalances are not corrected, necessitating increased volatility and prompting other nations to build alternative reserves.
- Market participants remain in a "wait and see" mode regarding tariffs, with major clients willing to absorb costs only up to a certain threshold, while sovereign wealth funds and central banks show long-term behavior by avoiding immediate treasury sales.
- Global trade dynamics are shifting toward bilateral negotiations, regional integration in Asia (such as ASEAN and Middle East-India links), and a "China plus one" strategy that favors India, alongside a slow, multi-year process of reshoring and supply chain restructuring.
- The US innovation ecosystem is expected to remain superior for the next decade, but the IPO market faces structural headwinds and sluggishness due to uncertainty, while liquidity remains fluid despite reticence in M&A activity.
- Capital markets are preparing for a "flight to quality" in high-yield debt, with acquisition financing and refinancing as key focuses, while technology acceleration via AI is expected to drive long-term optimism for equity valuations over the next three to five years.
- Corporate strategies will involve bold steps with a focus on securing financing and managing downside risks, particularly as small businesses face significant challenges from volatility compared to larger corporations.
- The Federal Reserve is expected to maintain "higher for longer" interest rates and act slower until a recession becomes visible, balancing the need to prevent rampant inflation with the risks of US debt rolling at higher interest rates.
- Specific market outcomes include potential US S&P 500 levels ranging from 4,000 to 7,000, with a baseline expectation of a modest year-end increase and a higher degree of conviction in equity prices rising over a three to five-year horizon.
- Institutional expansion plans include Citadel Securities targeting significant growth in Asia, Europe, India, and Japan, while exchanges like Nasdaq and those in Singapore and Hong Kong may ease listing requirements to support early listings.