Powell also stated a structural shift towards higher interest rates, driven by inflation. He expects the US 10-year yield could rise to around 5%, saying this trend is part of a “global rate reset higher.” He cautioned that such an environment limits the Fed’s ability to step in during market stress.
Powell highlighted a fragmented global environment that requires more careful investment decisions. “We are moving to a much more fractured world,” he said, emphasising that investors can no longer rely on broad indices like the S&P 500 as a proxy for global risk. Instead, they must look closely at specific regions, naming Japan and India as potential bright spots outside of the US.
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He also observed that the bond market is now influencing policy decisions, referring to how last week’s surge in US Treasury yields led to a noticeable change in tone from the US administration. This, he said, shows that markets still serve as a check on political decisions.However, Powell raised concerns over the vulnerability of the US’s debt position, stating that about 30% of its debt is held by foreign investors. He questioned how an “America First” approach can coexist with continued reliance on overseas funding.
Also Read: Markets shaky due to US policy uncertainty, not just tariffs: Milken economist
Despite the challenges, Powell urged investors not to react emotionally to market noise. While acknowledging many global risks, he said, “We shouldn’t throw the baby out with the bathwater.” He remains constructive on US equities, citing strong underlying trends like artificial intelligence (AI)-driven growth and solid earnings potential.
Powell also emphasised the enduring role of gold as a diversifier in uncertain times. Given the macro environment, he said, “It does feel like a time for gold.”
For the entire interview, watch the accompanying video
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