JPMorgan Sees a Fog of Uncertainty Hanging Over Markets for the Rest of 2025

Get ready for a challenging second half of 2025.

$JPM ’s cross-asset strategy team, led by Fabio Bassi, recently told clients that the U.S. trade policy issues are far from over. Earlier this year, the market was optimistic about America’s unique economic strength, but now the mood has shifted. Investors expect more policy mistakes that could push the U.S. close to a recession. Whether the U.S. can bounce back and reclaim its edge remains unclear.

What Does America’s Economic Strength Really Mean

Simply put, it’s the idea that the U.S. economy is stronger and more resilient than others, which has helped it lead global markets. But with ongoing trade tensions and policy uncertainty, that confidence is wavering.

Trade War Fatigue Has Set In But Risks Are Still Real

Investors are growing tired of the trade war drama—there’s only so much news they can take. But JPMorgan warns the risks are still balanced on both sides. On one hand, a trade deal with China could lower tariffs. On the other, a key court ruling on tariffs is still pending. No matter what happens, average tariffs in 2025 are expected to be higher than what was predicted at the start of the year.

Mixed Signals from the Economy But Markets Show Strength

Everyone expects the U.S. economy to slow down in the second half of the year, but Bassi’s team points out that the bigger picture is more complicated. Credit markets aren’t showing signs of serious trouble, and tariffs haven’t pushed inflation up too much yet. So we have weaker economic data but still a solid foundation underneath—this tug of war explains the “fog of uncertainty” that JPMorgan talks about.

Also, the economic policy uncertainty index remains high, even though market volatility has calmed. This tells us investors aren’t getting complacent; they’re still on guard.

JPMorgan’s Market Outlook and What It Means for Investors

For now, JPMorgan expects market resilience, higher interest rates for longer, and the ongoing AI boom to keep risk assets supported in early 2025. Stock gains may continue but will likely be limited and focused on a few big leaders.

They’re bearish on the U.S. dollar, especially against emerging market currencies, and prefer short-duration bonds in developed markets—just not U.S. Treasuries. Gold isn’t expected to rally much, but it still serves as a good hedge against geopolitical risks.

The Big Risk to Watch Is a U.S. Recession

If the U.S. does slip into a recession, markets could take a hit. An escalating trade war could hurt consumer spending, leading to weaker job numbers, and forcing the Federal Reserve to cut rates more aggressively—this scenario would weigh heavily on stocks and bonds.

My Take on What This Means for Investors

This report highlights that markets will remain caught between policy uncertainty and economic realities through the rest of 2025. Trade policies are the biggest wildcard—either easing could bring relief or escalation could spark new risks.

The resilience JPMorgan sees comes from three key drivers: steady high interest rates, the AI investment trend, and relatively stable credit conditions. This suggests investors haven’t abandoned risk assets but are instead cautious, waiting for clearer signals.

The call for a weaker dollar and stronger emerging markets also points to more diverse capital flows, making non-U.S. assets worth considering.

While recession risk is real, it’s not a guaranteed or immediate threat—more like a “gray rhino” to watch. Investors should stay flexible and keep an eye on trade talks and employment data to adjust their strategies.

When Will the Fog Lift and Clear the Way

That’s the big question for the second half of 2025. Knowing how to find opportunities in this uncertain environment will be key to successful investing in the months ahead.