Market outlook: Is the glass still half full? with Henry McVey (KKR) & Solita Marcelli (UBS CIO)
At a Glance
The desk remains cautiously optimistic about market conditions in 2025, as articulated by Henry McVey from KKR and Solita Marcelli from UBS, who emphasize a fundamentally supportive environment driven by strong productivity and fiscal initiatives. Per the full note , McVey highlights the importance of economic cycles and productivity gains in the U.S., asserting that after significant volatility in 2022, the outlook is improving. Consensus appears to support this view, with a focus on the potential for U.S. growth as other regions, like Europe and Asia, exhibit stronger fiscal spending, albeit amidst continuing uncertainties in policy directions.
Key Takeaways
- 01Market outlook is cautiously optimistic, driven by productivity gains and fiscal initiatives.
- 02Volatility in the S&P 500 emphasizes current market uncertainty but does not overshadow potential long-term growth.
- 03Firm targets indicate an overall bullish view for USD in the near term.
- 04Monitoring currency pairs like EUR/USD will be essential as economic indicators evolve.
Full Analysis
What the desk is arguing
The desk suggests that the overall economic landscape, while volatile, shows promising signs of stabilization and growth. According to McVey’s insights, factors such as productivity improvement and fiscal initiatives could catalyze positive market developments in the coming years. This positions the market outlook as "half-full," indicating the potential for upside despite underlying risks.
In the U.S., productivity is expected to be a key driver, as McVey recently acknowledged, further suggesting that this overall economic cycle will be defined by these productivity gains as seen in other regions. The S&P's dip of approximately 1.4% noted in the discussion highlights the current volatility, but the underlying fundamentals remain supportive for long-term investment.
Where it sits in our coverage
Our consensus target for the EUR/USD stands at 1.075, with a range observed between 1.04 and 1.12, in line with insights from major players like jpmorgan and bofa. The specific targets are as follows: - jpmorgan: 1.10 (Mar-26) - bofa: 1.04 (Mar-26)
This view aligns closely with the broader expectations of a strengthening USD but diverges at the lower end of the spectrum, with our target at the upper range, indicating a slightly more bullish stance than bofa.
How other firms see it
Overall, firm consensus leans towards moderate optimism for the USD, particularly among firms like jpmorgan that anticipate dollar strength amid global economic growth. Conversely, bofa presents a more cautious outlook, projecting lesser potential for growth in USD strength in their target forecasts.
Key currency pairs to monitor include EUR/USD, as the market dynamics around this pairing will reflect ongoing changes in economic policy and growth expectations, particularly in relation to U.S. Federal Reserve actions.
Market Implications
Watch for EUR/USD approaching key levels around 1.075 this quarter, as this aligns with our target amidst rising productivity expectations in the U.S. Any announcements regarding fiscal policies or economic growth indicators will be critical in shaping market sentiment towards these levels.
From the original
Hear from Henry McVey, Head of Global Macro, Balance Sheet & Risk and CIO of KKR’s Balance Sheet, and Solita Marcelli, CIO Americas for UBS Global Wealth Management, as they discuss and share their outlooks for the rest of 2025 and beyond, including key opportunities and risks.
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