Although this year is not even half over, it is already likely to feature in history books as one of extreme policy-induced volatility – not only in financial markets but also in terms of economic narratives and international relations. But where it will lead remains to be seen. Are we witnessing the fragmenting of the US domestic and international order, or just a bumpy ride toward a beneficial rewiring of both?We have already seen the S&P 500 nearly drop into a bear market (a decline of 20% from the recent high), only to climb back and end up broadly unchanged for the year. Bond yields have been all over the place, partly owing to a stomach-churningly volatile macroeconomic outlook. The probability of a US recession started the year below 10%, peaked in April at nearly 70%, and fell back below 40% just a month later.
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