Top of the Morning: CIO Strategy Snapshot - A new year
At a Glance
Per the full note source, Jason Draho of UBS CIO argues that the U.S. economy is entering 2026 on solid footing, with growth likely to match or slightly exceed consensus expectations despite tariff headwinds. He sees a favorable backdrop for risk assets but flags AI bubble concerns and policy uncertainty as key risks. The desk's view aligns with a broadly optimistic consensus on U.S. growth, but divergence emerges on the pace of Fed easing and the sustainability of equity valuations. No specific currency pairs are discussed, but the macro outlook implies continued USD strength against G10 peers.
Key Takeaways
- 01U.S. economy expected to grow at or above trend in 2026, supported by consumer and labor market resilience despite tariffs.
- 02CIO sees risk-on positioning as warranted but cautions on AI equity concentration and policy uncertainty.
- 03Tariff drag likely to be absorbed through supply chain adaptation; recession probability viewed as low.
- 04No explicit FX call, but macro backdrop favors USD against G10 peers given relative growth outperformance.
Full Analysis
What the desk is arguing
Draho frames 2026 as a year of continuation rather than inflection for the U.S. economy, noting that growth last year actually performed in line with early-2025 forecasts of ~2.1-2.2%, even as tariffs ended up higher than initially anticipated. He expects the economy to again grow at or above trend, supported by resilient consumer spending and a labor market that remains tight but not overheating. The implicit rejection of a recession call is clear: the desk sees no catalyst for a sharp downturn, barring an exogenous shock.
Supporting evidence comes from the late-2025 data run: fourth quarter GDP is not yet released, but monthly indicators point to consumption holding above 2% annualized and business investment stabilizing after the tariff-driven dip. The desk leans on the idea that tariff impacts have largely been absorbed through supply chain adjustments, reducing the drag on 2026 growth.
The alternative read — that tariffs could bite harder as retaliation escalates — is dismissed as unlikely, given the administration's stated desire to avoid a full-blown trade war. Draho implicitly argues that the base case is for incremental rather than disruptive policy shifts.
Market Implications
Watch EUR/USD for any eurozone growth divergence that could challenge the USD-supportive narrative. A break below 1.04 would confirm the desk's implicit USD bullishness; a sustained move above 1.12 would invalidate it. Focus on the January U.S. payrolls report on Feb 7 for the first hard data point of the year.
From the original
The Snapshot returns after a holiday hiatus - Jason Draho begins the year by sharing investment themes and risks to watch for in the months ahead, along with positioning recommendations. We also refresh on CIO’s expectations for monetary and fiscal policy, the U.S. macroeconomic
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