UBS CEO Highlights Market Volatility and Economic Outlook
Sergio Ermotti, the CEO of UBS, stated that financial market volatility could increase in the latter half of the year; however, he does not believe the United States is heading towards a recession, according to CNBC.
Last week, global stock markets experienced significant sell-offs as investors assessed weak economic data from the U.S., raising concerns about a potential economic downturn in the world’s largest economy.
Economic Indicators and Federal Reserve Policy
Additionally, the data has sparked questions regarding whether the Federal Reserve should adopt a less aggressive stance in its monetary policy. The U.S. central bank kept interest rates on hold at the end of July, maintaining the highest levels seen in 23 years.
When asked about the prospects for the American economy, Ermotti commented, “Not necessarily a recession, but certainly a slowdown is possible. The macroeconomic indicators are not clear enough to speak about recessions, and, in fact, it is likely premature. What we know is that the Fed has sufficient capacity to intervene and support this, although it will take time for any actions to be transmitted into the economy,” following the release of UBS’s second-quarter results.
Expectations for Interest Rate Cuts
UBS anticipates that the Federal Reserve will reduce the benchmark interest rate by at least 0.50 percentage points this year. Currently, traders are divided between a 0.50 and 0.25 percentage point cut at the upcoming Fed meeting in September, according to LSEG data.
In an interview with CNBC, Ermotti mentioned that we are likely to see increased market volatility in the second half of the year, partly due to the upcoming U.S. elections in November.
Geopolitical Factors and Future Uncertainties
<p“This is one factor, but if I look at the overall geopolitical picture and the macroeconomic landscape, what we have seen in the past two weeks in terms of volatility is, from my perspective, a clear sign of the fragility of certain elements of the system. We should certainly expect a higher degree of volatility,” he said.
Another uncertainty on the horizon is monetary policy and whether central banks will need to cut rates more aggressively to combat economic slowdown. In Switzerland, where UBS is headquartered, the central bank has cut rates twice this year. Both the European Central Bank and the Bank of England have also announced reductions.
