Insights

2025 State Street Research Retreat

State Street Research Retreat

This year’s global event brought cutting-edge market intelligence to investors in 17 locations across three continents, empowering them to navigate macroeconomic challenges, make better-informed decisions and gain a competitive advantage in 2025 and beyond.
 

Locations

2025 replays

Tariffs and inflation

Alberto Cavallo
Thomas S. Murphy professor of business administration at Harvard Business School, Co-founder of PriceStats and State Street Associates academic partner

As tariffs and inflation continue to dominate headlines, investors are grappling with uncertainty. In his session, “Tariffs and inflation,” Alberto Cavallo revisited how tariffs affect inflation, drawing on new data from 2025 trade policy actions.

Cavallo’s analysis revealed that while tariffs are large and widely applied, the resulting price increases at the retail level have been relatively modest. For example, Chinese imports faced steep tariffs, causing prices to rise quickly, though less than expected. He also found that domestic goods experienced price hikes, reflecting the indirect effects of global supply chains and uncertainty.

Cavallo emphasized that uncertainty around the duration and scope of tariffs leads companies to delay or gradually implement price increases. The inflationary effects of tariffs are real, but they are uneven and slower to materialize than expected, making this a trend investors must continue to monitor.
 

Trump’s first 100 days and beyond

Daniel Drezner
Professor of international politics, Fletcher School of Law and Diplomacy at Tufts University and State Street Associates academic partner

From a protectionist stance on economic policy to a transactional approach toward diplomacy, what does a second Trump term mean for investors? Daniel Drezner provides a forward-looking analysis of the return of Donald Trump to the White House.

Drezner explores the structural and behavioral shifts that may define a second term, highlighting weakened institutional guardrails, a more assertive leadership style—including the President’s embrace of the “unitary executive theory,”—and heightened policy unpredictability. He delves into the areas Trump is likely to prioritize: trade, immigration, and alliances, and examines their implications for regulatory regimes, market stability, and geopolitical risk.

With deep insights into the President’s first 100 days in office and the anticipated effects of his policies on US dynamism, Drezner offers critical context to better understand how Trump 2.0 could reshape the global landscape and influence markets.

The EPOCH of AI

Roberto Rigobon
Society of Sloan Fellows Professor of Management and Professor of applied economics at the MIT Sloan School of Management

Does artificial intelligence (AI) present a threat, an opportunity, or some combination of both? In this presentation, Roberto Rigobon examines AI through the lens of general purpose technologies that have transformed society in the past. He argues that while AI brings vast potential, humans have some capabilities that are fundamentally irreplaceable.

Rigobon introduces the EPOCH framework (Empathy, Presence, Openness, Creativity, and Hope) to define AI’s fundamental limitations and map them to a range of important job functions. Using this methodology, he assesses which jobs are most likely to be replaced or enhanced by AI in coming years. He offers a positive message that AI’s greatest opportunity lies in augmenting, not replacing, a range of essential human advantages.

2025 macro and market outlook

Lee Ferridge
Head of Multi-Asset Strategy in the Americas, State Street Markets

The macroeconomic landscape in 2025 has been defined by one word – uncertainty. Between trade wars, immigration policies, and of course tariff volatility, we’ve seen policy uncertainty reach record levels not seen since the COVID pandemic. Despite this, the market remains resilient, says Lee Ferridge.

In his session, “2025 macro and market outlook,” he analyzed the state of the markets using State Street’s Behavioral Risk Indicators and explained why investors are not panicking. He pointed to the Fed maintaining interest rates, investor sentiment rebounding from the initial shock of Liberation Day, inflation remaining contained and consumer spending holding up. Overall, Ferridge sees a resilient market that is resisting uncertainty but remains vulnerable to future policy missteps and macro shocks.

Political volatility, regime instability and geopolitical fragmentation

Iris Malone, Ph.D.
Director of AI and Data Science at GeoQuant

Iris Malone, Ph.D. explores how rising geopolitical volatility—especially under a second Trump term—is reshaping global market dynamics and, consequently, investment strategy. As they explain, political risk has become more than just background noise; it’s a driver of asset performance.

Drawing on GeoQuant’s AI-powered analytics, Malone walks the audience through “Political Pulse Risk” scores, derived from real-time media sentiment, demonstrating how they can effectively forecast market behavior, often outperforming traditional indicators. For example, GeoQuant’s models, which track political risk across 146 countries, predict elevated regime instability across 76 percent of emerging markets and indicate that US political volatility has measurably risen. This data-rich session offers practical insights for investors and highlights why integrating global political risk into portfolio construction and cross-border exposure is no longer optional—it’s essential.
 

Decomposing the components of institutional FX demand

Robin Greenwood
Harvard Business School’s George Gund Professor of Finance and Banking, State Street Associates academic partner

Robin Greenwood offers a deep dive into the influence of foreign equity flows on foreign exchange (FX) markets, with a particular focus on institutional hedging behavior.

According to Greenwood, hedging activity has surged since the 2008 financial crisis, with Euro-based fixed income investors now averaging a 95 percent hedge ratio, compared to 66 percent for their US peers. While equity investors hedge less consistently, many rebalance monthly to maintain target exposures, he notes.

He decomposes FX demand into four components: asset-driven flows, flow hedging, return hedging, and speculative demand. Notably, speculative flows—those not explained by asset allocation or hedging—can account for more than 80 percent of FX activity in certain markets. Domestic US investors also play a critical liquidity-providing role when foreign investors rebalance.

For investors navigating global markets, this session provides a nuanced perspective on the interplay between asset flows, hedging strategies, and speculative positioning.
 

Relevance-based prediction: A new approach to nowcasting

Mark Kritzman
CEO at Windham Capital Management, Senior finance lecturer at MIT’s Sloan School of Management, State Street Associates founding partner

What if economic forecasts could not only predict outcomes, but also quantify their reliability? That’s the premise of Relevance-Based Prediction (RBP), a pioneering, model-free approach to nowcasting macroeconomic indicators such as GDP.

In this concise and data-rich presentation, Mark Kritzman introduces RBP as a compelling alternative to traditional forecasting models. Rather than relying on fixed equations, RBP dynamically selects and weights historical data based on its contextual similarity to current conditions. The result is a transparent, adaptive, and statistically grounded method for nowcasting.

Grounded in information theory, RBP has demonstrated its effectiveness in real-world scenarios—from identifying unreliable COVID-era data to highlighting housing starts and trade as key signals during economic inflection points.

For institutional investors and analysts, RBP offers a powerful tool to improve predictive accuracy and support more confident decision-making in today’s complex macroeconomic environment.
 

Monitoring Central Bank tone and policy uncertainty in turbulent times

Ronnie Sadka
Professor of finance at Boston College’s Carroll School of Management, State Street Associates academic partner

Ronnie Sadka explored how media can be used to capture market narratives and measure central bank tone. Drawing on MKT MediaStats data from more than 150,000 sources, he demonstrated that shifts in central bank tone are strong predictors of yield movements.

Sadka highlighted the role of large language models (LLMs) in deciphering tone from media content, significantly enhancing predictive accuracy. He also examined social media narratives from Reddit conversations to capture real-time consumer sentiment from millions of users. This narratives-based approach enables investors to monitor and interpret market-relevant discourse at scale, offering a powerful tool for navigating uncertainty.
 

Divergent paths in uncharted waters: The US and Europe in uncertain times

Silvana Tenreyro
Professor of economics at the London School of Economics

In the wake of recent global shocks — from the pandemic and energy crises to geopolitical tensions and trade disruptions — Silvana Tenreyro explores why the US and Europe are now on sharply diverging economic trajectories.

Through economic analysis, she explains how the US surged ahead driven by a positive terms-of-trade shock and robust fiscal stimulus, while the UK and Euro area contended with energy price spikes, subdued consumption, and more difficult policy trade-offs.

Tenreyro examines the role of monetary policy, inflation expectations and the effects of tariffs and trade fragmentation on future growth. She also offers a forward-looking view on how artificial intelligence, defense spending and climate change could shape global growth and inflation.

For institutional investors navigating today’s complex environment, this session provides valuable insight into the macroeconomic forces at play and how central banks and policymakers may respond in the face of continued uncertainty.
 

Interpretable AI for investment decisions

David Turkington
Head of State Street Associates

In the high-stakes world of volatility forecasting, artificial intelligence (AI) is poised to transform how investment decisions are made, but the difficulty of interpreting AI’s predictions creates a major challenge.

David Turkington, Head of State Street Associates, challenges the “black box” nature of traditional AI and makes a compelling case for transparency in financial modeling.

He introduces a novel approach called “interrogation,” which tests the stability and logic of AI models without needing to retrain them. The result? Greater transparency, trust, and insight into how predictions are made.

Turkington also showcases Relevance-Based Prediction (RBP), a method that reframes forecasts as weighted contributions from historical data, which results in a model that not only performs well but also reveals how and why each prediction is made. By applying RBP to measure US stock volatility, he demonstrates its accuracy and interpretability.

For institutional investors navigating data-rich environments, this presentation offers valuable insights for harnessing AI for decision-making without sacrificing trust or transparency.
 

Is there any alternative to US stocks?

Marija Veitmane
Head of Equity Strategy, State Street Markets

Cayla Seder
Macro Multi-Asset Strategist, State Street Markets

The US stock market is widely viewed as the global benchmark, but growth expectations have softened amid uncertainty surrounding the current administration and its policy direction.

State Street Markets strategists, Marija Veitmane and Cayla Seder, explore whether viable alternatives to US equities exist, presenting a data-rich discussion that combines polling insights, earnings trends and market risk indicators. They highlight the continued dominance of American stocks, largely fueled by the tech sector, despite investor sentiment remaining fragile.

In light of this uncertainty, Veitmane and Seder offer prudent diversification opportunities outside of the US including in Australia and the UK. They note that Australia’s strong expected GDP growth is more resilient than that of other developed markets, and that its equities have recently outperformed forecasts. The UK, with its distinct sector composition, offers exposure to lower-beta segments and may appeal to investors seeking more balanced risk-return profiles.
 

Navigating markets in the age of disruption: A fireside chat

Moderator: Tim Graf
Head of Macro Strategy for EMEA, State Street Markets

Ramu Thiagarajan
Head of Thought Leadership,
State Street

Elliot Hentov
Head of Macro Policy Research, State Street Investment Management

In this London Outlook session, Tim Graf leads a dynamic discussion with Ramu Thiagarajan and Elliot Hentov on the structural forces reshaping global markets. The panel explores how fragmentation, policy divergence and rising risk premia challenge traditional asset allocation frameworks. They highlight the breakdown of long-standing correlations—such as between real interest rates and gold, or equities and bonds—and how these relationships have unraveled.

Hentov and Thiagarajan also examine the consequences of rising US debt, pointing to an unsustainable fiscal path and elevated term premiums as signs of market unease. They note that the US is running a primary deficit at the highest level of any industrialized country outside of war or recession. With central banks stepping back as buyers, markets face greater volatility. While the panelists do not foresee a crisis, they emphasize the need for investors to reassess diversification, prepare for structurally higher yields, and adapt to a more complex macroeconomic regime.