JPMorgan Chase Survey: Tariffs and Inflation to Dominate 2025 Markets, Volatility Poses Biggest Challenge for Traders

JPMorgan Chase Survey: Tariffs and Inflation to Dominate 2025 Markets, Volatility Poses Biggest Challenge for TradersJPMorgan Chase's latest electronic trading survey reveals that the global financial market turmoil sparked by a series of US tariff pronouncements is just the beginning of a turbulent year. The annual survey highlights the biggest challenges facing markets in 2025: inflation and tariffs, followed closely by geopolitical tensions

JPMorgan Chase Survey: Tariffs and Inflation to Dominate 2025 Markets, Volatility Poses Biggest Challenge for Traders

JPMorgan Chase's latest electronic trading survey reveals that the global financial market turmoil sparked by a series of US tariff pronouncements is just the beginning of a turbulent year. The annual survey highlights the biggest challenges facing markets in 2025: inflation and tariffs, followed closely by geopolitical tensions. The survey, conducted last month and covering over 4,200 institutional traders, comes on the heels of President Trump's disruption of global markets with a series of trade tariffs and unpredictable actions.

The results are striking: approximately 41% of respondents cited volatility as their biggest anticipated challenge in day-to-day trading, significantly up from 28% last year. Eddie Wen, JPMorgan's Global Head of Digital Markets, commented in an interview: "What's different this year is the timing of the volatility, its been somewhat unexpected. The way the market is reacting to headlines is surprising, and I expect this trend to continue under the current environment."

The uncertainty surrounding tariffs is placing immense pressure on traders. With the impact of tariffs on different asset classes remaining unclear, they are proceeding cautiously, treading carefully in response to market shifts. Chi Nzelu, JPMorgan's Global Head of FICC Electronic Trading, suggested this concern is expected to drive up trading volumes in currencies such as the Canadian dollar, Mexican peso, and offshore renminbi.

On Monday, the Mexican peso fell nearly 3% before rebounding to close up 1.5%; the Canadian dollar dipped as much as 1.7% before reversing course to finish 0.8% higher. Nzelu noted: "These are very significant moves for major currencies, triggering a huge amount of trade execution, from hedge funds to the retail market. We'll see how the year progresses, but from the start of the year, we've already seen one of our busiest days."

While hedge funds are the most active in the foreign exchange market, the increased trading volume surrounding tariff news is not confined to this area. Since Trump's election in November, the risk of higher import prices reigniting inflation has persisted, dampening any expectations of significant interest rate cuts by the Federal Reserve this year.

Trump had ordered a 25% tariff on all goods from Canada and Mexico, scheduled to take effect on Tuesday, but he postponed this decision after leaders from both countries pledged increased efforts to curb illegal immigration and drug trafficking. A 10% tariff on a broad range of goods from China has been implemented, but the White House hasn't ruled out a suspension.

The survey revealed that all respondents indicated they anticipate increased electronic trading activity. This aligns with the multi-year trend across asset classes, even for less liquid securities. Nzelu explained: "Electronic trading is critical because tariff announcements can come out on a weekend, prompting clients to seek liquidity at the opening of trading to rebalance their portfolios. At these crucial moments, they aim to access multiple channels, platforms, and banks."

Regarding trading platform choices, respondents were split between single-dealer platforms (28%) and multi-dealer platforms (38%), with 34% using both. "Lower execution/brokerage costs" was the top priority for single-dealer platform selection, while reducing information leakage was particularly important for cryptocurrency and cash equity traders.

It's noteworthy that approximately 71% of respondents said they have no plans to trade cryptocurrencies. However, Bitcoin and other digital currencies had record highs following Trump's election win. David Saks, the White House cryptocurrency czar, has stated that the government is exploring the feasibility of creating a "Bitcoin reserve," and certain barriers to banks offering digital asset services appear to be dissolving.

Wen commented on this: "Recent headlines suggest government support for the market, and recent changes have lowered the barriers to entry for members of the traditional banking community. Details are scarce at the moment, but we are closely watching developments."

JPMorgan's survey paints a clear picture of the complex challenges facing global financial markets in 2025 and beyond. Inflation, tariffs, geopolitical tensions, and the resulting market volatility will profoundly impact trading strategies and investment decisions. Traders need to adapt to this highly uncertain environment and actively seek strategies to navigate these challenges. The survey's prediction of increased electronic trading reflects a growing need among market participants for rapid response and efficient trade execution, particularly crucial in a heightened volatility market. While cryptocurrency trading isn't currently mainstream, government attention to digital assets and the opening of cryptocurrency services by traditional financial institutions suggest significant future changes in the cryptocurrency market are possible.

In summary, JPMorgan's survey provides crucial insight into the current complex global economic and financial environment, foreshadowing continued challenges and opportunities for markets in the future. Both institutional and individual investors need to closely monitor these trends and develop corresponding investment strategies to address potential risks and opportunities. Continued global political and economic uncertainty will necessitate more cautious and flexible approaches from investors, with close attention to market movements and related macroeconomic indicators. The survey's significance lies in its highlighting of the challenges facing global economic and financial markets and how they impact trading strategies and investment decisions. Understanding and adapting to these challenges is crucial for traders and investors to succeed in an uncertain market. This report provides a vital framework for investors and traders to better understand and navigate future market volatility.