Tariffs Drive 2025 Market Uncertainty, Atlanta Fed's GDPNow Forecast Turns Negative, Warns Lyn Alden

Macroeconomist and investment strategist Lyn Alden is signaling a shift towards a "headline environment" for financial markets in 2025, driven primarily by significant tariff announcements and escalating geopolitical uncertainty. This marks a departure from the more mechanically driven market conditions observed in 2023 and 2024, according to Alden. She suggests that these factors could lead to a "shock event" or substantial market volatility, emphasizing that such developments carry a "reasonable probability."

Alden highlights that major tariff implementations, such as a 25% across-the-board tariff or a doubling of tariffs on China, are creating immense unpredictability for businesses. This uncertainty profoundly impacts import and export forecasts, as well as profit margins, leading to a "fundamental erosion of predictability" in the business world. This environment makes it challenging for companies to plan for capital investments and long-term contracts.

Supporting this cautious outlook, the Atlanta Federal Reserve's GDPNow forecast recently turned negative, an outcome Alden suggests could be primarily driven by tariff uncertainty. She notes that earlier recessionary signals, including the misery index reaching levels typically associated with downturns and banks tightening lending standards, are now potentially being confirmed by the current economic climate.

Despite the broader market uncertainty, Alden maintains a bullish long-term view on Bitcoin, projecting a potential price of $100,000 to $150,000 by late 2025 or early 2026. She notes that Bitcoin's price movements have shown a high correlation (83% over 12 months) with global liquidity. Recent U.S. Treasury injections of $500 billion into markets since February 2025 are seen as a significant tailwind for speculative assets like Bitcoin.

Conversely, Alden expresses less optimism for the bond market, citing ongoing large fiscal deficits and the potential for long-term currency dilution. She views the U.S. dollar as currently overvalued, anticipating a potential 20% or more decline against other currencies over the next three to five years, despite short-term fluctuations. Gold, while having experienced a substantial rally, may undergo a period of consolidation but remains a long-term bullish asset due to its scarcity.