Embracing volatility as part of the investment cycle: Insights from Jurrien Timmer - November 24, 2025

Strategic perspectives on market adjustments

Jurrien emphasized that recent market pullbacks, including a 5% equity drawdown, should be viewed as normal and healthy recalibrations rather than crises. Historical data shows that annual corrections of 10-15% are common and serve to eliminate speculative excesses, setting the stage for sustainable growth. Despite recent volatility, the S&P 500 has shown strong year-to-date gains, reflecting its resilience in the face of market challenges. Recognizing corrections as part of the market cycle helps investors avoid reactionary decisions and encourages maintaining exposure to quality assets while selectively adding positions during dips.

AI and the Tech Sector: from volatility to productivity catalyst

Drawing parallels to the internet boom of the late 1990s, Jurrien noted that the surge in artificial intelligence (AI) shares has led to significant volatility, especially among speculative tech stocks and meme equities. This “shaking out” of weaker hands could be a necessary step toward a more sustainable growth trajectory. AI has the potential to significantly enhance productivity. Major technology firms, or hyperscalers, are investing heavily in AI infrastructure, akin to the historical development of utilities like electricity. These investments aim to enhance efficiency across industries, while also considering potential macroeconomic factors such as demographic challenges and high debt levels.

Federal Reserve policy and interest rate stability

Jurrien highlighted the Federal Reserve’s recent monetary policy actions, including two rate cuts and the end of quantitative tightening, which have eased pressures on the financial system. The stabilization of the 10-year Treasury yield around 4.10-4.15% has contributed to calmer bond markets and reduced volatility. This neutral stance by the Fed lowers the risk of further market stress from rising yields, historically a key driver of equity downturns. The current environment supports balanced portfolio allocations between equities and fixed income, with bonds providing diversification and positive real yields without heightened correlation to stocks.

Macroeconomic constraints and the imperative for productivity

High debt-to-GDP ratios exceeding 300% in developed economies, combined with aging populations and limited immigration, impose significant constraints on economic growth potential. These structural factors set a low non-inflationary “speed limit” for expansion, underscoring the critical need for productivity enhancements to sustain growth. AI’s role as a productivity catalyst is not only a technological opportunity but a macroeconomic necessity. Companies and sectors positioned to drive or benefit from productivity gains may have the potential to perform well in this growth environment.

Strategic portfolio positioning amid market dynamics

Given the current market landscape characterized by sector-specific volatility, stable interest rates and macroeconomic headwinds, Jurrien advised investors to adopt a strategic approach to portfolio management. This includes rebalancing to manage risk, diversifying internationally to reduce concentration in U.S. equities and engaging clients in discussions about risk tolerance and long-term objectives. He also noted that the tech sector’s substantial capital expenditures, estimated at $600 billion this year, may limit share buybacks, a traditional support for stock valuations.

Conclusion: embrace informed adaptation for long-term success