Sergio Ermotti, chief govt officer of UBS Group
Stefan Wermuth | Bloomberg | Getty Pictures
ZURICH, Switzerland ꟷ UBS CEO Sergio Ermotti mentioned Wednesday that market volatility might intensify within the second half of the 12 months, however he doesn’t imagine the U.S. is heading right into a recession.
International equities noticed sharp sell-offs final week as traders digested weak financial knowledge out of the U.S. which raised fears about an financial downturn on this planet’s largest financial 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 saved charges on maintain in late July at a 23-year excessive.
When requested in regards to the outlook for the U.S. financial system, Ermotti mentioned: “Not essentially a recession, however undoubtedly 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 should take time, no matter they do to be then transmitted into the financial 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 12 months. In the meanwhile, merchants are cut up between a 50 and a 25 foundation level lower on the Fed’s subsequent assembly in September, in line with LSEG knowledge.
Chatting with CNBC, Ermotti mentioned that we’re prone to see increased 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 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 by way of volatility, which, in my viewpoint, is a transparent signal of the fragility of some components of the system, … one ought to anticipate undoubtedly a better diploma of volatility,” he mentioned.
One other uncertainty going ahead is financial coverage and whether or not central banks must lower charges extra aggressively to fight a slowdown within the financial system. In Switzerland, the place UBS is headquartered, the central financial institution has lower charges twice this 12 months. The European Central Financial institution and the Financial institution of England have each introduced one lower up to now.
“Realizing 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 nasty factor, as a result of extra volatility means extra buying and selling earnings,” he added.
