Sergio Ermotti, CEO of UBS
Stefan Warmus | Bloomberg | Getty Photographs
Sergio Ermotti, chief govt of UBS in Zurich, Switzerland, mentioned on Wednesday that market volatility is more likely to improve within the second half of the 12 months, however he doesn’t consider the USA is heading into recession.
International inventory markets suffered a pointy sell-off final week as buyers digested weak U.S. financial information that stoked fears of a recession on this planet’s largest economic system. It additionally raises questions on whether or not the Fed must turn out to be much less hawkish on its stance on financial coverage. On the finish of July, the central financial institution saved rates of interest at a 23-year excessive.
Requested concerning the outlook for the U.S. economic system, Ermotti mentioned: “There’s not essentially a recession, however a slowdown is unquestionably potential.”
“The macroeconomic indicators should not clear sufficient to speak a few recession, and certainly, it could be too early. What we do know is that the Fed shall be well-positioned to step in and assist a recession, though it is going to take time, no matter whether or not they What to do, the CEO instructed CNBC on Wednesday, after the financial institution reported second-quarter outcomes.
UBS expects the Fed to chop rates of interest by at the very least 50 foundation factors this 12 months. In response to LSEG information, merchants at the moment have combined views on whether or not the Federal Reserve will minimize rates of interest by 50 to 25 foundation factors at its subsequent assembly in September.
Ermotti instructed CNBC that we might even see higher market volatility within the second half of the 12 months, partly as a result of U.S. election in November.
“That is an element, but when I have a look at the general geopolitical image, if I have a look at the macroeconomic image, the volatility that we have seen over the previous few weeks, it appears to me that it is a clear change within the system. Indicators of fragility in sure components … one will surely anticipate increased ranges of volatility,” he mentioned.
One other uncertainty going ahead is financial coverage and whether or not central banks must minimize rates of interest extra aggressively to fight the financial slowdown. In Switzerland, the place UBS is headquartered, the central financial institution has minimize rates of interest twice this 12 months. The European Central Financial institution and the Financial institution of England have each introduced one fee minimize to date.
“Understanding the upcoming unknown occasions such because the U.S. presidential election, we really feel complacent with very low volatility,” Bruno Verstraete, founding father of Lakefield Wealth Administration, instructed CNBC on Wednesday. , now we’re transferring to a extra regular system.
“Within the context of UBS, [more volatility is] Not essentially a foul factor, as higher volatility means extra buying and selling income,” he added.
