House Call: Talking Equity Markets with UBS Asset Management
At a Glance
The desk interprets the current volatility in U.S. equities as a consequence of macroeconomic uncertainty and a vacuum of critical data, leading to heightened sensitivity among traders. Per the full note from UBS Asset Management, Jeremy Zirin notes that despite a recent correction of 4-5%, the S&P 500 is still considerably up from its April lows. The upcoming U.S. economic indicators, particularly regarding spending and inflation, will likely be pivotal as they could help stabilize investor sentiment that has been shaken by recent volatility.
Key Takeaways
- 01The recent volatility in equities is attributed to a data vacuum amidst ongoing economic recovery signals.
- 02Investors are awaiting clearer economic indicators to guide market sentiment and positioning.
- 03The S&P 500 remains significantly up since April, making current declines appear less severe.
- 04Macroeconomic conditions and upcoming data releases are critical to stabilizing investor confidence.
Full Analysis
What the desk is arguing
The desk frames the recent dip in U.S. equities as a natural correction following a significant rally earlier in the year, reflecting an overall healthy economic backdrop despite current volatility. Per the full note, Jeremy Zirin emphasizes that the lack of recent data has left investors navigating blind, which increases sensitivity to any market-moving news.
As Zirin points out, the corrections seen in the S&P 500 were manageable after an impressive run-up of 38% from April to late October highs, making the recent declines seem less alarming in historical context. Investors remain cautious as they await clearer signals regarding economic health.
Where it sits in our coverage
As our internal coverage shows, the consensus target for USD is 1.075, with a range from 1.04 to 1.12. Key firms holding significant targets include: - jpmorgan: 1.10 (Mar 26) - bofa: 1.04 (Mar 26)
This perspective largely aligns with the broader market expectations while reflecting a cautious optimism that sits near the upper threshold of the consensus spread.
How other firms see it
Generally, firms like jpmorgan are aligned with our desk's interpretation, anticipating modest gains in equities driven by eventual data clarity. Meanwhile, bofa maintains a more cautious outlook, suggesting vulnerability in the face of inflation concerns. Currency pairs such as USD/EUR and USD/JPY may reflect the broader economic trends influencing these market conditions.
Market Implications
Watch for the S&P 500 to test support levels around its recent lows, as further downward movement could indicate increasing investor anxiety. Should economic indicators like U.S. GDP or inflation data come in better than expected, this could serve as a catalyst for equity stability.
From the original
Join Jeremy Zirin, Head of the Private Client U.S. Equity Teams with UBS Asset Management, as he shares a performance update and outlook for U.S. equities. Host: Dominic Schagar, Senior Equity Investment Specialist. Recorded on 25.11.19
Related speeches
4 itemsMacro Monthly Podcast with UBS Asset Management
The desk anticipates potential volatility in the near term as the U.S. government shutdown complicates economic data availability. Per the full note [source], UBS Asset Management highlights that other data sources, such as job market indicators and corporate earnings insights, remain positive despite the data blackout. This suggests resilience in the U.S. economy, but ongoing inaccessibility to government figures could spark uncertainty in market behavior. Currently, consensus targets are tightly drawn, making positioning critical amidst this lack of clarity.
UBS On-Air: Paul Donovan Daily Audio 'What really matters in volatile times'
The desk interprets Paul Donovan's insights as highlighting that while current market volatility is notable, its real economic impact may be overstated. He points out that non-US equity markets are generally up year-to-date, implying resilience in global equities—a point that could bolster risk sentiment in FX markets. Per the full note from UBS, the delay in US employment data could also result in a cautious outlook from traders, particularly around consumer spending behaviors that are crucial for economic momentum. Market participants should continue to monitor the US labor report's impending release on February 11.
Can the S&P 500 keep climbing?
The desk interprets the potential for the S&P 500 to sustain its upward trajectory as largely contingent upon ongoing economic resilience, particularly in the face of potential headwinds. Per the full note from J.P. Morgan Wealth Management, a strong labor market and solid consumer spending are key indicators supporting this bullish sentiment. With consensus targets surrounding this outlook reflecting a median expectation of 1.075 in USD strength, traders should remain vigilant for potential market volatility stemming from shifts in fiscal policy and economic data releases.
Top of the Morning: CIO Strategy Snapshot - UBS House View (Feb)
The desk's thesis is that financial markets have cooled slightly but retain underlying strength, anticipating a pivotal shift from upcoming economic data and policy decisions. Per the full note [source], despite recent fluctuations, the S&P 500's year-to-date performance remains positive, indicating a resilient market sentiment. With the next FOMC meeting on the horizon, traders must stay alert for potential policy implications that could sway market dynamics. Market observers appear to be recalibrating expectations as Q4 earnings reports unfold, suggesting that the current positioning reflects caution ahead of key announcements.
More from UBS ON AIR
5 items- UBS ON AIR
Fixed Income Conversation Corner: Private Credit edition with Dan Oneglia (Blackstone) and Leslie Falconio (UBS CIO)
- UBS ON AIR
UBS On-Air: Paul Donovan Daily Audio 'Equity volatility, economists’ indifference'
- UBS ON AIR
Top of the Morning: The Great Wealth Transfer - An introduction
- UBS ON AIR
Signal over Noise: A new Fed framework
- UBS ON AIR
UBS On-Air: Paul Donovan Daily Audio 'Sticking with the optimistic bias'