Sergio Ermotti, chief government officer of UBS Group
Stefan Wermuth | Bloomberg | Getty Photographs
ZURICH, Switzerland ꟷ UBS CEO Sergio Ermotti stated Wednesday that market volatility might intensify within the second half of the yr, however he doesn’t consider the U.S. is heading right into a recession.
World 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 the 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 stated: “Not essentially a recession, however positively a slowdown is feasible.”
“The macroeconomic indicators should not clear sufficient to speak about recessions, and really, it is in all probability untimely. What we all know is that the Fed has sufficient capability to step in and help that, though it’ll take time, no matter they do to be then transmitted into the economic system,” the CEO advised CNBC on Wednesday after the financial institution reported its second-quarter outcomes.
UBS expects that the Federal Reserve will lower charges by not less than 50 foundation factors this yr. In the intervening time, merchants are cut up between a 50 and a 25 foundation level lower on the Fed’s subsequent assembly in September, in keeping with LSEG information.
Talking to CNBC, Ermotti stated that we’re prone to see larger market volatility within the second half of the yr, partially due to the U.S. election in November.
“That is one issue, but in addition, if I take a look at the general geopolitical image, if I take a look at the macroeconomic image, what we noticed within the final couple of weeks when it comes to volatility, which, in my viewpoint, is a transparent signal of the fragility of some parts of the system, … one ought to anticipate positively a better diploma of volatility,” he stated.
One other uncertainty going ahead is financial coverage and whether or not central banks should lower charges extra aggressively to fight a slowdown within the economic system. In Switzerland, the place UBS is headquartered, the central financial institution has lower charges twice this yr. The European Central Financial institution and the Financial institution of England have each introduced one lower up to now.
“Figuring out 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 advised 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 revenue,” he added.
