Macro Monthly Podcast with UBS Asset Management
The desk's primary thesis emphasizes a resilient U.S. economy characterized by a schism among sectors—booming AI capital expenditures, a recessionary housing market, and stable consumer spending. Per the full note source, economists foresee U.S. real GDP growth at 2% coupled with persistent inflation near 3% into 2026. While there are signs of a cooling labor market, including a rising unemployment rate, the absence of significant layoffs keeps the Federal Reserve on an easing path, sowing increased investor confidence. The current landscape positions traders to consider inflation dynamics and growth forecasts when making FX decisions.
What the desk is arguing
The desk argues that the outlook for the U.S. economy as we approach 2026 is cautiously optimistic, despite a few sectors struggling. This nuanced view hinges on the perception of political and economic dynamics at play, including ongoing inflation risks and labor market adjustments.
A critical point noted in the UBS Asset Management podcast highlights that while growth forecasts remain stable, risks may skew bullish toward growth but bearish on inflation—suggesting potential market moves that may challenge more pessimistic forecasts. As cited, economic resilience may further influence the Fed towards moderating its stance, potentially allowing for easing policies to sustain growth.
Where it sits in our coverage
Our consensus target for USD/EUR currently stands at 1.075, aligning with other market expectations. Notably, jpmorgan maintains a target of 1.10 for March 2026, while bofa holds a more cautious stance with a target of 1.04 for the same tenor. As such, our view is at the mid-point of the current spread, reflecting broader market sentiment that tends toward stable growth amidst inflation concerns.
How other firms see it
Firms such as jpmorgan and others see the potential for a favorable U.S. GDP trajectory, while bofa presents a more cautious outlook. This divergence suggests a market at odds with itself, where growth optimism faces off against inflationary fears and policy tightening pressures. Expect volatility in USD/EUR attitudes, which will likely mirror shifts in Fed policy perceptions.
What the calendar says
With no significant calendar events coming up in the immediate term, trader focus will remain on U.S. economic data releases. Future releases will be critical in shaping the trajectory of expectations heading into 2026, particularly regarding growth metrics and inflation indicators.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01The U.S. economy shows resilience despite sectoral challenges, particularly in housing.
- 02Inflation remains a key concern, with forecasts indicating high levels persisting into 2026.
- 03Labor market conditions are softening but not destabilizing, keeping the Fed's policies in play.
- 04Political dynamics and upcoming economic data will heavily influence market movements.
Market implications
Traders should monitor inflation reports and GDP revisions closely. Technically, watch for resistance levels around 1.10 in USD/EUR as critical tests of sentiment emerge. The prevailing growth and inflation narrative may prompt position adjustments.
Risks to this view
A significant catalyst for a market reversal would be a stronger-than-expected uptick in inflation or a sudden spike in unemployment leading to aggressive Fed tightening. Such developments could prompt a reassessment of the current economic outlook and pivot risk sentiment.
I am pleased to welcome back to the show, our UBS Asset Management Monthly Macro Podcast. Today, I am pleased to welcome our speakers, Nicole Goldberger, Portfolio Manager and Head of Global Multi-Asset Portfolio Management, Evan Brown, Portfolio Manager and Head of Multi-Asset Strategy, and Fatou Kante, Multi-Asset Specialist. Fatou, with that brief introduction, I'll pass it over to you.
Thank you, Siobhan. Welcome, everyone, to today's call. For today's call, we're going to dive into the big macro theme shaping the market, the latest headlines, and then we'll close out with our asset class views.
So, Evan, starting with you, after the longest government shutdown in history, the government recently reopened, and we've seen fresh data come through. So, what's your read on the U.S. economy right now, and where do you kind of see growth and inflation risk skewed heading into next year? Sure.
Thanks, Fatou. So, yes, the data are finally trickling in, and look, I think the underlying story is still one of resilience, given the policy shocks that we had earlier in the year on tariffs, the government shutdown. We'll still describe it as there's kind of three economies right now.
You've got AI CapEx, which is booming. You've got the housing market, which is essentially in recession, and then in between, you have the consumer, which is hanging in pretty well, all said and done, and we do have a labor market that continues to cool. The unemployment rate is rising, but it's not unraveling.
We're not seeing a spike in layoffs. So, that's what's keeping the Fed on an easing track. Going into next year, just looking at consensus economist forecast, so the consensus for the U.S. economy is real GDP at 2%, and then inflation remaining at sticky high around 3%, and I think we'd actually, we think the risk to growth are skewed to the upside and the risk to inflation skewed to the downside, and a major reason for this is political in nature.
I think we're all aware that probably voter number one issue, number two issue, and number three issue is affordability, and you can see the administration, Trump administration start to back off on tariffs on groceries, they've been lowering tariffs on China. We think that continues such that the effective tariff rate actually comes down, and what that means is inflation isn't as high, and that also puts more money in the consumer's pocket and supports growth. Also, going into next year, we're going to have the fiscal stimulus that was legislated earlier this year, and the one big beautiful bill act, tax rebates are going to start going into consumers while it's in the spring, so all in, we think actually the growth inflation mix could look pretty good relative to consensus, and that sets us up well for 26.
Sources & References
How we cover this story