Sergio Ermotti, chief government officer of UBS Group
Stefan Wermuth | Bloomberg | Getty Photos
ZURICH, Switzerland ꟷ UBS CEO Sergio Ermotti mentioned Wednesday that market volatility may intensify within the second half of the 12 months, however he doesn’t consider the U.S. is heading right into a recession.
International equities noticed sharp sell-offs final week as buyers digested weak financial information out of the U.S. which raised fears about an financial downturn on this planet’s largest economic system. It additionally raised questions on whether or not the Federal Reserve wanted to be much less hawkish with its financial coverage stance. The central financial institution stored charges on maintain in late July at a 23-year excessive.
When requested concerning the outlook for the U.S. economic system, Ermotti mentioned: “Not essentially a recession, however positively a slowdown is feasible.”
“The macroeconomic indicators usually are not clear sufficient to speak about recessions, and truly, it is in all probability untimely. What we all know is that the Fed has sufficient capability to step in and assist that, though it may take time, no matter they do to be then transmitted into the economic system,” the CEO informed CNBC on Wednesday after the financial institution reported its second-quarter outcomes.
UBS expects that the Federal Reserve will minimize charges by not less than 50 foundation factors this 12 months. In the intervening time, merchants are cut up between a 50 and a 25 foundation level minimize on the Fed’s subsequent assembly in September, in line with LSEG information.
Talking to CNBC, Ermotti mentioned that we’re prone to see larger market volatility within the second half of the 12 months, partially due to the U.S. election in November.
“That is one issue, but additionally, if I have a look at the general geopolitical image, if I have a look at the macroeconomic image, what we noticed within the final couple of weeks when it comes to volatility, which, in my standpoint, is a transparent signal of the fragility of some components of the system, … one ought to anticipate positively the next diploma of volatility,” he mentioned.
One other uncertainty going ahead is financial coverage and whether or not central banks should minimize charges extra aggressively to fight a slowdown within the economic system. In Switzerland, the place UBS is headquartered, the central financial institution has minimize charges twice this 12 months. The European Central Financial institution and the Financial institution of England have each introduced one minimize to date.
“Understanding the occasions that are the unknowns on the horizon just like the U.S. presidential election, we turned complacent with a really low volatility, now we’re shifting to a extra regular regime,” Bruno Verstraete, founding father of Lakefield Wealth Administration informed CNBC Wednesday.
“Within the context of UBS, [more volatility is] not essentially a foul factor, as a result of extra volatility means extra buying and selling earnings,” he added.
