Greg Jensen Update: Resilience and Risk in a Shifting Global Economy (July 15, 2025)

An Update on the Big Forces Shaping Markets Today with Greg Jensen (YouTube link)

As global markets continue to shift, the Co-CIO Greg Jensen of Bridgewater Associates shared his perspective on the evolving landscape of modern mercantilism. He explored how trade policies, rising geopolitical tensions, and fluid capital movements are reshaping economies—especially that of the U.S.

Despite mounting challenges like tariffs and volatility, Jensen noted the surprising durability of financial markets. But he cautioned that resilience doesn’t mean low risk. The current climate demands strategic adjustments—chiefly, diversifying portfolios and seeking undervalued assets beyond U.S. borders. Investors should brace for inflation, currency swings, and geopolitical shocks, while staying agile in seizing hidden opportunities.

Key Points

Below is a summary of Jake Davidson's interview with Greg Jensen on YouTube.

• Modern Mercantilism: The Trump administration's push for higher tariffs, particularly post-July 9, 2025, reflects a broader mercantilist policy aimed at strengthening the US economy and working class. This is a response to global economic shifts, notably China's growth, but introduces uncertainty and potential retaliation from other nations.
• Geopolitical Risks: Heightened conflicts (e.g., Russia-Ukraine, Israel-Iran) and global economic dependencies increase the risk of tail events, necessitating resilient investment strategies.
• Market Resilience: Despite tariffs and geopolitical uncertainty, markets have not reacted as negatively as expected, offering investors a chance to diversify and hedge risks. However, risk premiums in equities remain low, while bonds are starting to reflect higher risk premiums.
• Economic Slowdown and Fed Policy: A global economic slowdown is anticipated, but not a full recession. The Federal Reserve is likely constrained by inflation uncertainties from tariffs and fiscal stimulus, potentially delaying rate cuts. Other global policymakers may ease monetary policy faster due to disinflationary pressures outside the US.
• Fiscal and Debt Concerns: Large US deficits and global debt issuance strain bond markets, but technical adjustments (e.g., issuing shorter-term debt) may mitigate supply-demand imbalances. Long-term fiscal sustainability depends on avoiding inflation or currency crises, with productivity growth (e.g., via AI) potentially offsetting debt burdens.
• Investment Strategy: Investors are overly concentrated in US equities due to past outperformance. Diversifying across asset classes and regions, while hedging against inflation and dollar depreciation, is critical in this volatile environment. European and Asian markets, despite risks, offer opportunities for rebalancing.
• Section 899 and Capital Flows: Provisions like Section 899 (retaliatory taxes on foreign entities) signal increasing mercantilism, raising concerns about stable rulemaking and foreign investment in US assets. This could lead to reduced capital inflows and higher risk premiums over time.
• AI and Productivity: The rapid development of AI is seen as a potential driver of productivity, which could support economic growth and mitigate fiscal pressures, though its full impact is still emerging.

In summary, the environment is risky but presents opportunities for portfolio adjustments toward diversification and resilience, as markets may not fully reflect the growing uncertainties. Investors should prepare for potential inflation, currency depreciation, and geopolitical shocks while leveraging opportunities in undervalued non-US assets.