Geopolitical Uncertainty and the Return of Inflation: What Lies Ahead for Global Markets

The global economic environment has undergone significant changes in recent months, with central banks around the world easing both fiscal and monetary policies. In the U.S., the Federal Reserve has cut interest rates by 50 basis points in recent weeks and signaled more easing. This movement, along with a similar stance from Europe, China, and the Bank of England, has resulted in expectations for an economic recovery in 2025, which could be stronger than initially expected. Investors were initially positioned for a weaker economy, anticipating a possible recession. However, the narrative has shifted to one of increasing economic activity and potential inflationary pressures.