UBS On-Air: Market Moves

The shooting at former US President Trump’s election rally during the weekend has provoked only a limited market reaction. Markets are concerned about policy probabilities, and while individuals may condemn acts of violence against political candidates, they will not necessarily change their policy projections. There is a popular perception that acts of violence against a candidate increase their support, but this is not necessarily true. Analysis is complicated by US polarization, and shorter news cycles from social media. This adds to uncertainty without necessarily changing policy probabilities.

We close out the week by sharing expectations for Q2 corporate earnings reporting, along with thoughts around equity valuations and positioning. We also touch on this week’s inflation data, and preview what you can expect in the week ahead. Featured is Matt Tormey, Equity Strategist Americas, UBS Chief Investment Office. Host: Shiavon Chatman

US consumer price inflation details continue to suggest that US rate cuts are overdue. Harmonized inflation slowed again (to 1.85% y/y). Durable goods prices are falling at the most aggressive rate in two decades. Most sectors experience deflation somewhere in the US. Investors should remember that the slowing of the fantasy owners’ equivalent rent has no direct effect on consumer spending power.

With the Republican National Convention set to commence, we preview the themes that will be covered, along with a look at potential VP picks. We also take a pulse on swing state polling in the aftermath of the first Presidential debate, and touch on calls for President Biden to step down from the ticket. Plus, thoughts on this week’s NATO Summit in Washington DC. Featured is Shane Lieberman, Senior Governmental Affairs Advisor, Governmental Affairs US. Host: Daniel Cassidy

Join members of the UBS Chief Investment Office for some timely thoughts and reflections around the June Consumer Price Index (CPI) print, and what this latest inflation data might mean for monetary policy, and the markets. Featured are Brian Rose, Senior Economist Americas, and Nadia Lovell, Senior US Equity Strategist. Host: Daniel Cassidy

This week on the Viewpoints podcast, Burkhard spends time reviewing performance trends across global markets, and what they tell us about investor sentiment. We also touch on the outcomes of the recent snap elections within France and the United Kingdom. Plus, on the lighter side, share a summer reading recommendation now that summer holiday season is in full swing.

We have US June consumer price inflation data. Federal Reserve Chair Powell thinks this matters, because politicians think this matters, and Powell thinks politicians are important. Economists, who are actually important, tend to regard headline US consumer price data as a rather poor quality statistic.

As we have made our way into the second-half of the year, Xingchen drops by to reflect on Emerging Market equities performance drivers over the first-half, and shares expectations for performance in the months ahead. We also review the current opportunity-set for Emerging Market equities, and some developments within the asset class to be mindful of. Featured is Xingchen Yu, Emerging Markets Strategist Americas, UBS Chief Investment Office. Host: Daniel Cassidy

Perhaps Federal Reserve Chair Powell has opened an economics book (possibly “How the world really works—the economy”). Powell told the Senate banking committee that cutting rates too early would be bad, but cutting rates too late would also be bad. Unfortunately, the Fed Chair insisted that more “good data” was required to induce a rate cut. With inflation down over eight percentage points in less than two years, real rates soaring, and deflation peppering sectors of the US, it is starting to look like rate cuts are too late.

Federal Reserve Chair Powell is testifying to the Senate Banking Committee today. The issue is whether Powell (who is not an economist) will be able to answer any perceptive questions that might be asked. If US inflation is lower than in Europe, why is the Fed not cutting rates? Why emphasize data dependency when data is unreliable and policy works with a lag?

In the wake of the June Jobs Report, we take a pulse on the state of the US Labor Market and how the Fed might be interpreting the latest round of data. We also review expectations for monetary policy in the coming months, along with the current asset allocation recommendations from CIO. Featured is Brian Rose, CIO Senior Economist Americas. Host: Daniel Cassidy

On the mid-year outlook edition, we spend time reflecting on the drivers of fixed income performance over the first-half of the year, and outline expectations for the second-half, including for rates and monetary policy. We also spend time sharing views when it comes to positioning within fixed income. Featured are Leslie Falconio, Head of Taxable Fixed Income Strategy Americas with the UBS Chief Investment Office, and Ashok Bhatia, Co-Chief Investment Officer for Fixed Income with Neuberger Berman. Host: Daniel Cassidy

Tune in for to hear commentary on the first debate between President Biden and former President Trump. How might the debate impact the election in November and your investments?

France’s second-round legislative election produced an unexpected result, with the far right Rassemblement National pushed into third place. This highlights again a market problem—politics is becoming more important to markets, but opinion polls are less reliable as a guide to outcomes. Polarization means financial institutions try to strike a neutral tone—“opinion polls suggest” rather than “we believe that”, but if polls are less reliable market mispricing is more common.

The UK general election result is now clear (for the benefit of US readers, many countries are able to get a definitive result within hours of voting having concluded). The result was entirely as expected by markets, with the Labour Party winning a sizable majority. Former Prime Minister Truss (who presided over the Truss debacle in markets) lost her seat.

US markets are closed as the country celebrates its attempt to escape rule by a monarch. There has been media speculation about US President Biden’s candidacy for re-election. Markets are not likely to react to such speculation at this stage. Politically, markets primarily focus on the probabilities of economic policy change.

Federal Reserve Chair Powell said yesterday that the strength of the US economy and labor market meant the Fed could take its time in cutting rates. This is a rather risky point of view. US inflation has collapsed more than eight percentage points, and the harmonized measure is below 2%. Taking time means tightening policy further. Can the US economy withstand more tightening?

The British Retail Consortium shop price index (measuring prices in selected stores in the UK) sank to a 0.2% y/y rate. Is this the end of profit-led inflation? Profit-led inflation occurs when retailers use a dominant narrative to disguise profit increases when raising prices. However, at some point, price increases become the dominant narrative and consumer rebellion defeats margin expansion.

The first round of the French elections produced results broadly in line with opinion polls (as to the popular vote). An unusually large number of second-round votes could be three-way contests. That makes the final outcome harder to predict. In the past, there has been a “front républicain” with third-placed moderate candidates withdrawing to increase the chances of defeating a more extreme party (in this election, the Rassemblement National). It is not clear how many constituencies will follow such a strategy.

Polls immediately after the US presidential debate declared former President Trump the winner. While incumbents often “lose” debates, US President Biden reportedly lost by a large margin. This invites increased investor scrutiny of Trump’s policies, especially around trade. The economic consequences of tariffs are relatively obvious, but there is uncertainty about how many campaign pledges will translate into policy action.

On this week’s episode of Viewpoints, Burkhard spends time reviewing an abundance of global election-related developments, including thoughts around Thursday’s US Presidential debate, along with upcoming snap elections in both the UK and France. Burkhard explains the impact of these developments to markets, along with offers guidance as to how investors should navigate through election-induced market volatility.

For this week, Shane previews the highly anticipated debate between President Biden, and former-President Trump, including a review of the rules and conditions. We also spend time reviewing likely areas of focus and the issues on the minds of the American voter. Plus, examine what the latest national and swing-state polling is pointing to. Featured is Shane Lieberman, Senior Governmental Affairs Advisor, Governmental Affairs US. Host: Daniel Cassidy

Our conversation revisits the emerging markets as we discuss how the asset class has evolved in recent years, performance expectations for the asset class through year-end, and considerations when it comes to portfolio positioning. Featured is Alejo Czerwonko, Chief Investment Officer for Emerging Markets Americas, UBS Chief Investment Officer. Host: Daniel Cassidy

US first quarter GDP is revised, and will keep being revised; we will not have a clear picture of current GDP performance for five years or more. Markets will pay some attention to prices from the personal consumer expenditure deflator, but May data is due tomorrow. Politicians use GDP as a weapon or a rallying cry, but GDP is so far from real world living standards that voters do not care whether growth is reported as 1.4% or 1.3%.

Our conversation revisits the possibility of a ‘Roaring 20s’-style economy to take shape in the US, as we review the updated assessment of such a scenario from the UBS Chief Investment Office. Featured is Jason Draho, Head of Asset Allocation Americas, and Paul Hsiao, Asset Allocation Strategist Americas, UBS Chief Investment Office. Host: Daniel Cassidy

A monthly check on US equity market performance and positioning considerations with Jeremy Zirin, Senior Portfolio Manager, and Head of the Private Client US Equity Team, and Dominic Schagar, Senior Equity Investment Specialist with UBS Asset Management.

There are several ECB speakers on the agenda today. One speaker, Rehn, has already suggested that two further rate cuts are a reasonable estimate for ECB action this year. This is in line with most economists’ views.

Our conversation today focuses on the current election cycle as it relates to the potential impacts of political bias when it comes to financial decision making, and how to navigate accordingly. Featured are Justin Waring, Senior Total Wealth Strategist, and Ainsley Carbone, Retirement Strategist, from the UBS Chief Investment Office. Host: Daniel Cassidy

Hear from top investment professionals from the UBS Asset Management’s Multi-Asset Team.

Jay Dobson is joined by Dave Intoppa for an in-depth conversation about where we are in the energy transition story, including a look at technological innovations, investment considerations, and what to expect in the years (and decades) ahead. Featured are Jay Dobson, Energy and Utilities Sector Strategist Americas, with the UBS Chief Investment Office, and Dave Intoppa, Portfolio Manager, at Newton Investment Management (BNY Investments). Host: Daniel Cassidy

In the absence of interesting data, markets focus on less important things, like politics. France has a political debate between current Prime Minister Attal, Rassemblement National president Bardella, and Nouveau Front Populaire leader Bompard. Presumably they will promise voters everything that they desire, without explaining how it will be paid for. Some plans are estimated to cost two Trusses (4% of GDP of unfunded commitments). The reality of government is likely to moderate such plans.

In a special session from Singapore, Chief Investment Officer Mark Haefele is joined by Min Lan Tan, Head CIO of APAC, Paul Donovan, Chief Economist, and Sundeep Gantori, Equity Strategist, to discuss our outlook for the second half of the year and provide recommendations for investors.

This week, Jason outlines the events that are set to take place that will not only determine the investment landscape through year-end, though also shape expectations for 2025. We also review the current asset allocation recommendations from CIO. Featured is Jason Draho, Head of Asset Allocation Americas, UBS Chief Investment Office. Host: Daniel Cassidy

For this month we focus on the 2024 proxy season, including a review of expectations, a look at some notable trends and themes, along with comparisons to what 2023 delivered. Featured are Amantia Muhedini, Sustainable & Impact Investing Strategist Americas, UBS Chief Investment Office, and Amy O’Brien, Global Head of Responsible Investing with Nuveen. Host: Daniel Cassidy

This week has a lot of politics in it, and markets are rarely that good at pricing political risk. The US presidential debate may make investors pay attention to political risk earlier than is normal in the US political cycle. Because so much attention has focused on the suitability of the candidates for office (rather than their policy positions), this debate might actually matter.

This week we follow-up on rulings issued by the Supreme Court, including US tax on foreign business income. Shane also provides some takeaways from the recent G7 Summit, and touches on this year’s focuses and themes. Plus, some background on the Russia-North Korea military pact and the global implications. Featured is Shane Lieberman, Senior Governmental Affairs Advisor, Governmental Affairs US. Host: Daniel Cassidy

Yesterday’s central bank decisions support the trend of following inflation lower. The Swiss rate cut reflected a desire to stabilize real rates, not stimulate the economy. Bank of England Governor Bailey linked future rate cuts to lower inflation; an August rate cut looks increasingly likely. Only the Federal Reserve seems to have forgotten that rising real rates are repressive.

With the halfway point of 2024 having arrived, we reflect on how market and macro conditions have evolved thus far, and share expectations for the balance of the year. Plus, we outline positioning recommendations across equities, fixed income, and alternatives. Featured are Jason Draho, Head of Asset Allocation Americas, Leslie Falconio, Head of Taxable Fixed Income Strategy Americas, and Nadia Lovell, Senior US Equity Strategist. Host: Daniel Cassidy

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

The Bank of England offers some excitement as investors await the start of the UK interest rate easing cycle. That start is probably not today, but should be soon. The BoE relishes dissent and discussion to help form higher quality decisions (the Federal Reserve might like to take note), making policy outcomes less predictable. With consumer price inflation down nine percentage points from the recent highs, the case for lowering real interest rates is strong—but the BoE might want a couple more data points before acting.

May UK inflation data was as expected across the multiple measures released today. Headline consumer price inflation was 2%. The decline in inflation has almost nothing to do with government policy, and not that much to do with the Bank of England—a lot of this is the natural slowing of temporary inflation drivers. Durable goods prices sank further into deflation.

Eurozone final May consumer price inflation is very unlikely to change from the initial report. At 2.6% y/y, the rate is above the ECB’s target, but rate cuts are still justified. Inflation has fallen eight percentage points from its high. The impact of that on real interest rates is significant.

This week Jason ‘connects the dots’ to make sense of market performance, this in the wake of last week’s inflation data, along with the outcome of the June FOMC meeting. We also consider emerging geopolitical risks, and upcoming macro factors. Plus, share CIO’s current investment outlook and positioning recommendations. Featured is Jason Draho, Head of Asset Allocation Americas, UBS Chief Investment Office. Host: Daniel Cassidy

China’s May data dump showed weaker-than-expected industrial production, despite earlier reports of stronger exports. Domestic retail sales were stronger, slightly distorted by the timing of holidays. Restaurant sales were stronger, as people seem inclined to spend on having fun.

Yesterday’s US producer price inflation numbers added to a general sense of disinflation. However, the lower inflation reported in consumer and producer prices will not be fully experienced by consumers. The slowing fantasy price of owners’ equivalent rent does not affect real world spending power. Seasonal adjustments deliberately distort reality, and so disinflation here does not change consumers’ inflation experiences.

This week Shane highlights a slate of rulings expected to be delivered in June by the Supreme Court, updates on the campaign trail (including recent and upcoming primaries), reflects on former President Trump’s visit to Capitol Hill - plus, recaps the annual Congressional baseball game! Featured is Shane Lieberman, Senior Governmental Affairs Advisors, Governmental Affairs US. Host: Daniel Cassidy

On this week’s episode of Viewpoints, Burkhard covers a range of topics, including a potential timeline for higher for longer rates in the US, the gathering of world leaders at the G7 Summit, how the law of acceleration will change the world and economies over the next decade, and more.

The Federal Reserve did nothing on rates. Investors have desperately sought additional guidance on policy, putting the fabled dot plots in focus. These black smudges on a piece of paper are really not that helpful. More Fed members think that there will be two cuts this year than anything else. Given the disinflation forces in the economy, several of those who suggested one cut likely give a high probability to two cuts.

Join Jason Draho, Head of Asset Allocation Americas, and Brian Rose, Senior Economist Americas, for thoughts and reflections on May inflation data, along with the outcome of the FOMC meeting. Jason also speaks to the market response, and shares CIO’s positioning recommendations. Host: Daniel Cassidy

Economists are overstimulated by the US today. We have the excitement of US consumer price inflation. We have the excitement of a Federal Reserve policy decision. Fed Chair Powell’s press conference can be relied upon to dampen economists’ passions. The Fed is unlikely to change policy. The fabled dot plots of policy projections will add confusion (a black mark on a chart gives no sense of confidence or risk).