Increased policy uncertainty and tactical short-termism from Treasury-led fiscal dominance will create frequent market volatility and regime shifts.

Policy decisions are becoming increasingly tactical and short-termist due to compressed political cycles and election-driven fiscal priorities, creating an environment where Treasury-led fiscal dominance will drive frequent shifts in market direction. Sources expect this tactical approach to policy to generate recurring volatility and regime changes rather than stable, predictable policy frameworks.

When fiscal and monetary policy become driven by short-term political cycles rather than long-term structural objectives, it increases the frequency of policy reversals and creates uncertainty around the sustainability of any given policy regime. This structural unpredictability typically forces investors to shorten their time horizons and reduce position sizes, which can amplify volatility and reduce the market's ability to absorb large capital flows without significant price moves.