England (PinionNewswire) — In this macro policy outlook, Merritt Dawsley—a São Paulo–based investment management specialist with a background in finance, economics, AI, and blockchain—examines how today’s policy mix is reshaping global markets. The world has moved beyond the “post-COVID inflation shock” narrative into something more complex: slowing but sticky inflation, fragmented trade, and a powerful AI investment boom.
For portfolio builders, this means the old playbook of simply “buying the dip on rate cuts” no longer works. Instead, investors have to navigate a stop-start easing cycle, ongoing tariff shocks, and rapid technological change.
1: The Fed: A Divided Central Bank in a Slowing but Not Collapsing Economy
The Federal Reserve has already cut rates once in 2025, but its policy committee is deeply split on what comes next. Recent minutes show that many policymakers were uneasy about the October rate cut, warning it could entrench inflation and damage credibility.
Market pricing for the December meeting has become extremely volatile:
- Probabilities of a further cut have swung widely, and economists now see only modest odds of another immediate move.
- New York Fed officials have hinted that there is “room” for a near-term cut, pushing odds higher again and underscoring how finely balanced the debate is.
From Merritt Dawsley’s investment-management perspective, three points stand out:
- Higher for longer – but not forever. Forecasts now assume only a gradual move back toward a “neutral” policy rate around 3–3.25% over the next couple of years, not an aggressive easing cycle.
- Policy uncertainty is now a macro variable itself. The split between “hawks” and “doves” inside the Fed makes rate paths harder to price, increasing volatility across duration-sensitive assets.
- US inflation remains above target. IMF and other forecasts still see US inflation running above 2% into 2025, limiting how fast the Fed can ease without reigniting a credibility problem.
For investors, Merritt Dawsley emphasizes curve and sector positioning rather than simple directionality: neutral or slightly short duration, with selective exposure to rate-sensitive growth names where earnings are genuinely backed by cash flow, not just cheap money.
2: Europe and the UK: From Crisis Mode to Slow-Growth Stability
In the euro area, the inflation shock of 2022 has largely faded. ECB officials now see inflation converging back toward the 2% target, and the central bank has already lowered its key rate by around 200 bps in this easing cycle.
However, the message is clear: no rush to cut further. Economists widely expect the ECB to hold rates at current levels through at least 2026, assuming growth remains modest but not disastrous and inflation stays close to target.
In the UK, the Bank of England has already cut the policy rate several times since 2024 as inflation falls back, but its November report still stresses the need to ensure inflation returns fully to 2% and stays there.
From Merritt Dawsley’s lens:
- Europe looks like a low-growth, low-inflation, carry-driven environment, with modest return expectations but slightly improving real yields.
- Equity opportunities are more idiosyncratic, tied to export competitiveness, re-shoring trends, and niche industrial or green-transition themes, rather than broad index beta.
3: Emerging Markets and Brazil: Opportunity Under Policy and Trade Stress
The IMF’s latest World Economic Outlook paints a picture of a global economy that is resilient but “under strain,” with growth slightly weaker than pre-pandemic norms and risks tilted to the downside.
Within emerging markets, growth is projected to stay above advanced-economy levels, but trade tensions and tariff shocks—especially from the US—are now a central macro risk. These tariffs are forecast to drag global growth down and push inflation up, shaving roughly half a percentage point off expected global growth and raising recession risk in the US.
For a macro analyst based in São Paulo like Merritt Dawsley, this has specific implications:
- Brazil and LatAm assets stand to benefit when the Fed eventually normalizes policy, but they are also vulnerable to swings in global risk sentiment driven by US trade and tariff headlines.
- Local central banks that front-loaded their hiking cycles now have more room to cut, but must balance growth support with the risk of capital outflows if US yields back up again.
- Commodity-linked currencies may remain volatile yet structurally attractive if global supply disruptions and green-transition demand keep real commodity prices supported.
Merritt Dawsley highlights that country selection and FX management are more important than ever: the macro regime rewards investors who can differentiate between EMs with credible monetary frameworks and those without.
4: AI and Blockchain: Policy Shock Absorbers and New Risk Channels
One of the most overlooked macro stories of 2025 is how artificial intelligence investment is reshaping aggregate demand. The IMF has noted that a powerful surge in AI-related capex has helped shield the US from a sharper slowdown, keeping growth notably stronger than in many peers—though potentially at the cost of higher near-term inflation.
This is precisely where Merritt Dawsley’s background in AI and blockchain becomes relevant to macro:
1: AI as a cyclical stabilizer.
Massive investment flows into AI data centers, chips, and software create a capex floor for the business cycle, offsetting weakness in more traditional sectors.
2: Delayed productivity vs. early inflation.
If productivity gains from AI arrive more slowly than the spending, you get strong demand and tight labor markets without immediate efficiency gains, keeping core inflation sticky and complicating central-bank easing paths.
3: Blockchain and market structure.
Parallel to AI, blockchain-based financial infrastructure is maturing. As institutional adoption grows, tokenized assets and 24/7 settlement could gradually change how liquidity, collateral, and even monetary transmission work, though regulators are only beginning to adapt.
In Merritt Dawsley’s view, AI and blockchain together form a “structural macro shock”: they raise potential growth and rewire financial plumbing, but they also inject new uncertainty into inflation dynamics and capital flows.
5: Investment Playbook: How Merritt Dawsley Views the Current Macro Regime
Bringing these macro and policy threads together, Merritt Dawsley frames the current environment as a transition from emergency policy to a constrained, data-dependent normalization:
1: Rates:
- Fed: slow, uncertain easing with high internal disagreement.
- ECB / BoE: cautious, with Europe closer to a stable low-inflation equilibrium.
2: Growth and inflation:
- Global growth subdued but not collapsing, with downside risks from tariffs, policy uncertainty, and geopolitics.
- Inflation trending lower globally, but US inflation still above target, giving central banks limited room to make policy mistakes.
3: Technological shock:
- AI and related digital infrastructure are supporting growth and equity valuations, particularly in the US, while also damping the usual negative feedback from tighter policy.
Given this, Merritt Dawsley’s high-level strategic principles are:
1. Favor quality over pure beta.
In both developed and emerging markets, emphasize companies and sovereigns with strong balance sheets, pricing power, and credible institutions.
2. Use duration selectively.
With the Fed divided and inflation still above target, intermediate duration and barbell strategies may offer better risk-reward than aggressive long-duration bets on rapid easing.
3. Lean into real assets and tech together.
Combine AI-linked equities and digital-infrastructure plays with selective exposure to real assets and inflation hedges, recognizing that policy mistakes or tariff escalations can still re-ignite inflation.
4. Respect policy risk.
Tariffs, geopolitical shocks, and regulatory moves around AI and blockchain are not tail risks—they are central drivers of return distributions.
In short, Merritt Dawsley sees today’s macro landscape as a multi-dimensional policy puzzle: central banks trying to normalize without triggering recession, governments weaponizing trade policy, and technology reshaping the growth and inflation outlook. For investors, the winners will be those who can connect macro policy, technological disruption, and disciplined portfolio construction into a single, coherent framework.
