UBS On-Air: Market Moves

On this episode of Viewpoints, Burkhard weighs diverging viewpoints when it comes to the condition and health of the US economy, along with whether there is further room to run in equity markets in consideration of realized returns over the past couple of years. In doing so, Burkhard breaks down the anatomy of bull-and-bear markets.

ECB President Lagarde is set to speak again. It is very unlikely that the last 24 hours have changed the world view of the ECB president. The tone of yesterday’s remarks signaled the direction of travel for Euro area rates was clear, though there was an attempt to insert some ambiguity about the pace of easing.

We spotlight the latest edition of the quarterly UBS CEO Macro Briefing book as we explore how business owners and investors feel about the upcoming US election, the state of the US economy, the course ahead for Fed monetary policy, and more. Featured is Paul Hsiao, Asset Allocation Strategist Americas, UBS Chief Investment Office. Host: Daniel Cassidy

Yesterday’s pontification of Federal Reserve speakers created a stir in bond markets. There were a range of views expressed, from “keep on cutting” to “more gradual cuts”. Markets, rendered skittish by Fed’s “data dependency” on undependable data, have raised yields. US inflation is down one percentage point since last December, which would justify a similar reduction in rates over the course of this year.

On this episode, Jason and Ron meet in-studio to discuss investment considerations and opportunities as it relates to potential outcome scenarios of the upcoming US election. They also spend time exchanging thoughts on the health of the US economy, the road ahead or monetary policy, and more. Featured is Jason Draho, Head of Asset Allocation Americas with the UBS Chief Investment Office, and Ron Temple, Chief Market Strategist with Lazard Asset Management. Host: Daniel Cassidy Recorded on Oct 17.

As talk of a “no landing” scenario for the US economy has reemerged, Jason weighs whether the US economy has already landed, though with a 5% nominal growth rate. We also discuss CIO’s recent upgrade of equities to “attractive” and outline additional asset class views per the latest UBS House View. Featured is Jason Draho, Head of Asset Allocation Americas, UBS Chief Investment Office. Host: Daniel Cassidy

German September producer prices are expected to stay in deflation (this is not a surprise, they have been in deflation for over a year). While other factors will add noise to consumer price data, producer prices are a better reflection of corporate pricing power. The deflation signals should secure expectations for further rate cuts from the ECB.

US data once again reminded investors of the wisdom of never underestimating the hedonism of the US consumer. September retail sales were strong (the data do include the effect of inflation). Consumers are often disbelieving of the data, but the value of US retail sales are up over 25% from the start of 2021 while goods inflation is up a little more than 17% over the same period. That suggests a rising living standard, at least when measured by material possessions.

As we look towards year-end, Frank Sileo drops by the studio to provide a performance update and outlook for the preferred securities sector. We also spend some time highlighting positioning considerations within preferreds. Featured is Frank Sileo, Senior Fixed Income Strategist Americas, UBS Chief Investment Office. Host: Daniel Cassidy

The ECB meets. Final September Eurozone consumer price data should confirm that inflation has fallen almost nine percentage points from its peak, and a whole percentage point this year. Cutting rates is simply an act of chasing inflation lower and keeping real rates stable.

Hear from top portfolio managers and business heads from UBS Asset Management’s Muni, Taxable Fixed Income, and Liquidity teams. They share views on the markets and what they believe you should be focused on within the fixed income space.

Former US President Trump suggested tariffs of up to 2,000% on cars imported from Mexico (an unconventional interpretation of NAFTA). US and European investors have viewed proposed tariffs as a bargaining device, not to be taken seriously. The random suggestion of numbers like 2,000% does suggest more rhetoric than rigorous policy analysis. However, the repeated theme of trade taxes implies the policy is important.

Our conversation updates on relief and recovery efforts for hurricane-impacted states, recent developments surrounding growing tensions across the Middle East, and what key swing state polling is pointing to with Election Day just a few weeks away. Featured is Shane Lieberman, Senior Governmental Affairs Advisor, Governmental Affairs US. Host: Daniel Cassidy

UK labor market data are due. Employment is not a constraint on British consumers (and unemployment data come with quality health warnings). Average earnings will be a market focus, although if flexible working allows people to move into higher paid employment this raises average earnings without raising wages.

As we begin a new trading week, Jason takes inventory of potential sources for volatility in the coming weeks, as it relates to uncertainty surrounding economic data, Fed policy, the US election, Q3 corporate earnings, and policy developments out of China. Plus, a review of CIO’s current positioning recommendations. Featured is Jason Draho, Head of Asset Allocation Americas, UBS Chief Investment Office. Host: Daniel Cassidy

China’s much anticipated economy ministry press conference over the weekend did not give much detail. There were hints, and suggestions, and promises, but few clear proposals. International investors are looking for fiscal support because if consumers are restricting spending out of concerns for the future, monetary policy easing is unlikely to offer much help.

As we conclude another trading week, Matt reflects on the latest round of inflation data, along with recaps the September FOMC meeting minutes. We also spend time addressing current equity market valuations, equity positioning views, along with the commencement of corporate earnings reporting. Featured is Matt Tormey, Equity Strategist Americas, UBS Chief Investment Office. Host: Shiavon Chatman

US September consumer price data signaled disinflationary trends. Food prices have disproportionate political importance, but around 40% of the monthly increase in food prices was due to eggs. Can an election be swayed by an egg? Some key states saw food prices fall compared to August. Voters remember price levels, and tend to have an idea of a “fair” price for food items that would have been fixed in their minds many months ago. The political impact of this price report is probably marginal.

US September consumer price inflation should show a slower rate of growth in the headline measure. Now that the Federal Reserve has finally started its easing cycle, this matters a little less to markets, but it is still important. Critically, middle-income inflation is running at about half the headline rate, and that gives the group an important degree of spending power.

On this episode, Jason and Ken meet in-studio to discuss investment considerations and opportunities across Artificial Intelligence, private markets, and real estate. They also spend time exchanging thoughts on the health of the US economy, the road ahead or monetary policy, and more. Featured is Jason Draho, Head of Asset Allocation Americas with the UBS Chief Investment Office, and Ken Caplan, Global Co-Chief Investment Officer with Blackstone. Host: Daniel Cassidy Recorded on Sep 26. Blackstone and portfolio company data discussed in this podcast (including portfolio revenue, default and other data) is as of Q2 2024, unless otherwise stated.

The minutes of the last Federal Reserve meeting are due, and should be fascinating. This meeting cut interest rates by 50bps, and had the first Fed governor dissenting in over two decades. Dissents may possibly be managed as part of the theater of the Fed—a single high profile dissent may mask wider disquiet at the scale of the rate cut. Certainly Fed Chair Powell’s dependence on dodgy data is looking a questionable strategy in the wake of recent (inevitable) data revisions.

October House View live conversation, featuring insights from Leslie Falconio, Head of Taxable Fixed Income Strategy, CIO Americas, and Paul Hsiao, Asset Allocation Strategist, CIO Americas. Recorded on Oct 3.

New York Federal Reserve President Williams—a genuine economist, who should thus be listened to —signaled that the Fed is happy with the state of the US economy and that two 25bp rate cuts this year would be appropriate. This clearer guidance for the future is a big improvement on Fed Chair Powell’s inept dependence on dodgy data.

On this week’s Snapshot, Jason reflects on the latest round of jobs data and weighs what a better-than-expected growth outlook means for the Fed’s monetary policy course into 2025. We also spend time outlining CIO’s current allocation views and guidance. Featured is Jason Draho, Head of Asset Allocation Americas, UBS Chief Investment Office. Host: Shiavon Chatman

The US employment report last week was wrong, because the data always is. However, the general direction of US employment signals an economy very far from “recession”. However, voters do not think about abstract concepts like GDP, have a distorted view of price levels, and believe that pay increases are due to them working harder. While the reality is people have a higher standard of living for the same amount of work, the perception is people are working harder to stand still.

As we close out the trading week, Brian and Paul weigh in on the latest jobs data, and what it means for the health of the US economy, along with the course ahead for monetary policy. Plus, we review CIO’s current allocation recommendations, and preview what you can expect in the week ahead. Featured is Brian Rose, Senior Economist Americas, and Paul Hsiao, Asset Allocation Strategist Americas, UBS Chief Investment Office. Host: Shiavon Chatman

It is US employment report Friday, the monthly celebration of dubious quality data that always thrills markets. Looking at the broad picture of the US labor market, the position is what it has been all year. Firms are slower to hire, but not keen to fire. This gives job security, and supports consumer spending patterns.

On this episode of Viewpoints, Burkhard turns focus to the notable rally across Chinese markets in recent time, and speaks to how investors should interpret the move, along with shares investment lessons to consider.

The economic calendar is strewn with irrelevancies in the form of business sentiment opinion polls. For-profit polls crave the oxygen of publicity, but neither their profit motives nor the attendant media attention are guarantees that they reflect economic reality. Partisan bias, inaccurate answers to questions, and falling response rates are all challenges to the usefulness of surveys (of any kind).

Hear from Mark Haefele, GWM Chief Investment Officer, Kiran Ganesh, Global Head of Investment Communications, Jason Draho, Head of Asset Allocation for CIO Americas, and Carolina Corvalan, Fixed Income Strategist.

Markets have responded to escalating violence in the Middle East. Overnight missile attacks by Iran against Israel differed from those in April—there was less warning, and faster missiles were used. Israeli Prime Minister Netanyahu has pledged retaliation. Investors have seen this as a more serious escalation, and oil prices have risen. However, even at higher levels oil prices are still near the lows for the year. This limits the economic consequences for now.

With the Fed’s easing cycle underway, we examine how central banks across the EM landscape are moving toward accommodative policies, and the implications for investors. Featured is Alejo Czerwonko, Chief Investment Officer for Emerging Markets Americas, UBS Chief Investment Office. Host: Daniel Cassidy

The US vice-presidential debate is more political entertainment than market relevant. Investors are interested in policy details, and election probabilities. Policy details are unlikely (neither campaign wants to give their opponents ammunition). Vice-presidential debates rarely affect the main political race. The question is whether this debate generates the same level of TikTok content as the presidential debate.

As the third quarter concludes, we take stock of the US economy and financial markets heading into the fourth quarter, as well as other geopolitical matters, along with developments within China. Featured is Jason Draho, Head of Asset Allocation Americas, UBS Chief Investment Office. Host: Daniel Cassidy

Politics can dominate headlines without creating meaningful consequence for financial markets. Escalating military action in the Middle East is an example. Investors are likely to focus on consequences for oil prices and safe-haven flows, which seem muted for now. The success of the far-right in Austria’s weekend elections may be a larger investor concern. The global trend toward prejudice politics risks disrupting global trade and capital flow in the near term, and undermining the benefits of technological change in the longer term.

Brad rejoins the podcast to discuss the investment thesis behind CIO’s most preferred view of the US financials sector. We cover a performance update, and outlook, along with a look at related investment themes, risk considerations, and sub-sector preferences. Featured is Brad Ball, Financials Analyst Americas, UBS Chief Investment Office. Host: Daniel Cassidy

We close out a busy week by recapping the annual UN General Assembly in New York, how an agreement was reached to avoid a shutdown of the US government, along with a look at the latest developments on the Presidential campaign trail. Featured is Shane Lieberman, Senior Governmental Affairs Advisors, Governmental Affair US. Host: Daniel Cassidy

With the relaunch of the Municipal Market Guide publication series, Sudip drops by the studio to discuss performance trends across the muni market, along with a near-term outlook, and positioning views. We also spend some time spotlighting the Private Higher Education sector. Featured is Sudip Mukherjee, Senior Municipal Strategist Americas, UBS Chief Investment Office. Host: Daniel Cassidy

As September quickly draws to a close, Burkhard reflects on how this traditionally turbulent month for investors has not proven as such here in 2024. With that, Burkhard considers scenarios, or unexpected possibilities, that could serve as ‘the next surprise’ for both equity and bond investors. Plus, thoughts on the Cycling World Championship in Zurich, Switzerland.

Yesterday’s US GDP revisions offered several lessons to investors. The tendency for many countries to revise economic activity frequently, significantly, and positively is a reminder that real-time data lacks precision and data dependency is not a proper policy framework. Someone should attempt to explain that to Federal Reserve Chair Powell. The 2022 “technical recession” (a media term, not an economist’s term) was predictably revised out of existence.

In the wake of new economic stimulus measures announced by China’s central bank, Xingchen Yu drops by to review the announced measures, what they’re aimed at, along with both the economic and investment implications that investors should be mindful of. Featured is Xingchen Yu, Emerging Markets Strategist Americas, UBS Chief Investment Office. Host: Daniel Cassidy

Leslie and Barry rejoin for a deeper dive look into the implications of the Fed’s commencement of policy easing to fixed income assets, in particular credit sectors. We also cover CIO’s broader thinking when it comes to positioning across fixed income, in anticipation of further easing measures by the Fed to be implemented through year-end. Featured are Leslie Falconio, Head of Taxable Fixed Income Strategy Americas, along with Senior Fixed Income Strategist, Barry McAlinden. Host: Daniel Cassidy

The US offers the “final” revisions to second-quarter GDP alongside annual data revisions. Declining real-time date reliability means that revisions matter to economists. US growth data is generally underestimated quite a bit, in the early releases. This problem may increase in the future—for instance, budget cuts mean that labor market data is likely to become less reliable.

A fireside chat which covers the current market and macro environment, including thoughts around the US economy, the Fed, the upcoming US election, and positioning across fixed income and real estate. Featured is Jeffrey Gundlach, Chief Executive Officer, Chief Investment Officer and Founder of DoubleLine Capital. Host: Daniel Cassidy

Policy interests markets, but few voters. Emotion tends to be more important in elections. The global rise of economic nationalism is rooted in emotion, but is also a policy with real world consequences. Yesterday, former US President Trump pledged to use corporate tax cuts and consumer tax increases (via tariffs) to bring manufacturing jobs back to the US. Who would do those jobs with near full employment was not specified. Investors have hitherto regarded Trump’s tariff proposals as being emotional rather than policy, given their extreme nature.

It’s Climate Week in New York! Amantia drops by the studio to outline the focus items of Climate Week, this as part of the annual United Nations General Assembly. We also discuss the implications of US election outcomes to climate policy, what’s in focus as it relates to ESG at the ‘State Level’, and the historical performance of sustainable investments during both Republican and Democrat administrations. Featured is Amantia Muhedini, Sustainable & Impact Investing Strategist Americas, UBS Chief Investment Office. Host: Daniel Cassidy

China’s central bank cut interest rates and reserve requirements, eased home ownership regulation, and proposed support for equity markets. The measures were announced with considerable dramatic effect, presumably aiming to ensure China’s officially reported GDP data meets the official GDP target.

We kick off the trading week by reviewing the latest UBS House View and positioning recommendations. Jason also weighs whether the Fed’s aggressive commencement of easing signifies a sustained soft landing on the horizon, along with the newly in focus debate over the terminal Fed funds rate. Featured is Jason Draho, Head of Asset Allocation Americas, UBS Chief Investment Office. Host: Daniel Cassidy

There are a few Federal Reserve speakers scheduled, freed from the self-imposed silence that precedes a policy decision. Fed President Bostic, talking specifically on the economic outlook, is likely to attract attention. Markets want to hear that the Fed is scrambling to catch up with falling inflation, not that there is anything wrong with the economy. Fed President Kashkari is speaking on childcare—not immediately market moving, but important. Flexible working has allowed women (who are disproportionately responsible for childcare) to move to better paid jobs.

In the wake of the Fed’s decision to cut interest rates for the first time in four years, the CIO fixed income team spends time reflecting on the policy shift, what to look out for in the months ahead, and what an easing policy environment means for fixed income assets. Featured are Leslie Falconio, Head of Taxable Fixed Income Strategy Americas, along with Senior Fixed Income Strategists’ Barry McAlinden and Frank Sileo, from the UBS Chief Investment Office.