The VIX is still at a high level

The elevated level of the VIX suggests that investors remain concerned — particularly that the Federal Reserve may keep interest rates high and that the economy is still under strain.

Global Economy

1. Slower Growth
   • According to the OECD, global growth is weakening. Their most recent outlook projects growth at ~2.9% in 2025–2026, down from stronger previous years.
   • The World Bank forecasts about 2.7% growth for 2025 and 2026.
   • The IMF (July 2025) projects global GDP growth at 3.0% in 2025 and 3.1% in 2026, though it notes “persistent uncertainty.”
   • The United Nations is more pessimistic: their mid-2025 report projects 2.4% growth for 2025.
2. Trade Uncertainty and Fragmentation
   • A major drag on growth is trade policy risk: rising tariffs and trade fragmentation are creating headwinds.
   • These trade tensions contribute to policy uncertainty, which is making businesses more cautious, particularly with investment.
   • According to the World Economic Forum, many economists expect higher trade barriers and more constrained global supply chains.
3. Inflation & Monetary Policy
   • Inflation pressures remain, especially where trade costs are rising.
   • But on the broader global scale, inflation is expected to moderate: IMF projects headline inflation to fall to 4.2% in 2025, then to 3.6% in 2026.
   • Central banks face a tricky balancing act: cutting rates could help growth, but there’s risk if inflation proves sticky.
4. Debt Burdens & Fiscal Risks
   • Many countries—especially developing ones—are grappling with high debt loads, which limit their fiscal flexibility.
   • Tighter financial conditions could put pressure on debt servicing, particularly in lower-income economies.
   • There’s also risk in propping up growth through fiscal stimulus: governments need to be careful to maintain longer-term debt sustainability.
5. Investment & Productivity Weakness
   • Investment remains muted in many places, especially public investment.
   • Structural challenges: slow productivity growth is a concern for long-term potential.
   • For many developing economies, catching up (in terms of income levels) is becoming harder.
6. Geopolitical Risks
   • Geopolitical uncertainty (wars, trade tensions, fragmentation) is a major wildcard.
   • These risks not only affect trade but also investment decisions and supply chain stability.
7. Regional Divergence
   • United States: Growth is expected to slow. OECD projects U.S. GDP growth dropping from ~2.8% (2024) to ~1.6% in 2025.
   • China: Continued moderation. OECD forecasts China’s GDP growth to decline (e.g., ~4.7% in 2025).
   • European / Advanced Economies: Mixed recovery; Europe’s growth remains modest, and policy uncertainty could weigh.
   • Developing Economies: Slower long-term growth is a concern, especially for poverty alleviation and development goals.