The Uncertain Landscape of the US Market: Implications for Investors and Businesses
As we explore the complexities of the current US market, it becomes clear that uncertainty and volatility are dominating the economic landscape. A recent survey found that 13 per cent of respondents are extremely likely to withdraw from the US market, a sentiment echoed across various economic indicators.
Economic Uncertainty and Tariff Impacts
One of the key drivers of this uncertainty is the imposition of US tariffs and the resulting global retaliation. This has caused a ripple effect across many sectors, prompting business leaders to take a cautious stance. According to EY’s M and A outlook, the lack of clarity surrounding tariff implementation timelines, scope, and potential retaliatory measures has caused many companies to pause investment decisions, including spending on capital and recruitment.
This cautious approach, when combined with market sensitivity to changes in policy, has increased financial market volatility. The VIX, a widely followed measure of market volatility, has risen significantly above its historical average, pointing to a high level of market anxiety. For example, the NASDAQ has declined by more than 20 per cent since its peak in February 2025, with recent trading days showing dramatic swings both upwards and downwards.
Impact on GDP and M and A Activity
The effects of these tariffs are also visible in GDP growth forecasts. EY has revised its US real GDP growth projections for 2025 and 2026 down to 1.1 per cent, compared to earlier estimates of 1.7 per cent and 1.6 per cent respectively. This slowdown is expected to influence mergers and acquisitions activity, with total US deal volume predicted to rise by just 1 per cent in 2025, a sharp decline from the 19 per cent increase seen in 2024.
Although the first quarter of the year showed promise, with deal volumes exceeding last year’s levels, momentum slowed towards the end of the quarter. This downward trend is likely to persist due to ongoing sluggish GDP growth, continued uncertainty around policy, and increased financial market volatility.
Market Volatility and Investor Sentiment
The current environment of market volatility reflects not only economic data but also investor sentiment. Rapid swings in the stock market, with some days recording gains or losses of between 5 and 12 per cent, underline how unpredictable conditions have become. These fluctuations are further influenced by global trade disagreement and political uncertainties, making it harder for investors to make informed decisions.
Strategic Considerations for Businesses
In light of the current uncertainty, both businesses and investors must act thoughtfully and strategically. Several important approaches include
Risk Management
Developing thorough risk management strategies is essential for reducing exposure to sudden market changes and shifts in policy.
Diversification
Spreading investments and operations across different regions and sectors can help to reduce risk and improve resilience during volatile periods.
Monitoring Policy Changes
Staying alert to policy developments and understanding their implications can give businesses a crucial edge in decision-making.
Long-term Focus
While short-term market movements may be disconcerting, keeping a long-term perspective can reveal opportunities that emerge during market corrections.
Conclusion
The US market in 2025 is marked by profound uncertainty and volatility, fuelled by a combination of economic and policy factors. It is vital for businesses and investors to be well-prepared and agile in their responses. By recognising the root causes of current challenges and taking proactive steps to manage risk and seek out opportunity, it is possible to navigate this uncertain environment effectively.
At Cutts and Co Accountancy, we are dedicated to providing our clients with the knowledge and guidance needed to make informed financial decisions in times of uncertainty. Whether you are planning M and A activities, managing your investment strategy, or looking to understand wider economic trends, our team is here to help you face the evolving landscape of the US market in 2025.
