UBS economist Paul Donovan describes 2025 as a year fraught with polarization and political uncertainty, cautioning that economic consequences are likely to upset stakeholders on all sides. He notes that while developed economy consumers are starting the year with solid balance sheets and rising real incomes, the overarching risk lies in political unpredictability. Donovan highlights U.S. President-elect Trump’s proposed tariffs as an example of aggressive policies that could tax consumers and impact inflation and growth—risks that markets are not fully pricing in, instead relying on economic realities to temper political extremes. This assumption extends globally, with countries like China and Germany also navigating reduced middle ground due to polarization. Donovan warns that if markets miscalculate the political and economic landscape, the resulting fallout could be severe.
https://www.fxstreet.com/news/a-year-of-upsetting-everyone-ubs-202501020832
