Macro Monthly Podcast with UBS Asset Management
The desk interprets the recent commentary from UBS Asset Management as a reflection of increasing economic caution, particularly highlighted by dismal soft data versus the still-resilient hard data. Per the full note source, portfolio manager Evan Brown emphasized the dichotomy between these data types, noting that while consumer and business confidence is waning, actual economic activity remains robust, though it may be poised for slowdown. This sets the stage for traders to brace for potential shifts in market sentiment as the data landscape evolves. Current consensus on relevant currency targets reflects a span that captures this caution, creating a notable context for upcoming trading decisions.
What the desk is arguing
The desk frames the commentary from UBS Asset Management as indicative of a cautious outlook for both the U.S. economy and financial markets. Evan Brown points out that soft data, particularly consumer and business confidence metrics, has deteriorated, suggesting potential economic slowing, despite hard data remaining relatively stable.
The recent U.S. macro data presents a mixed picture: while employment and spending are holding firm, consumer confidence measures have dropped significantly, as noted by Brown. For instance, a significant plunge in the University of Michigan Consumer Sentiment Index has historically preceded shifts in economic activity.
Where it sits in our coverage
Regarding USD/EUR targets, our consensus stands at 1.075, with a range between 1.04 and 1.12. Specific targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This view aligns closely with the target set by jpmorgan, which leans towards the upper end of the projected range, suggesting a more bullish sentiment compared to bofa, which presents a more conservative outlook.
How other firms see it
Overall, firms like jpmorgan align with a bullish interpretation of market conditions, emphasizing the resilience of hard data, while firms such as bofa express caution, mirroring the bearish sentiment present in the soft data.
Watch the USD/EUR pair closely as its trajectory could reflect the underlying tensions between soft and hard economic data, especially as the markets reassess their expectations going forward.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Soft data shows considerable deterioration in consumer and business confidence.
- 02Hard data remains resilient, though caution signals potential economic slowdown.
- 03Market sentiment may shift as traders respond to mixed economic indicators.
- 04Consensus targets indicate varying views on currency trajectory reflecting this cautious outlook.
Market implications
Traders should focus on the USD/EUR pair, especially if recent soft data trends signal a broader market recalibration. Given the current consensus, crossing above 1.10 could indicate more bullish bets forming, while a drop below 1.04 might validate bearish views.
Risks to this view
Any unexpected resilience in soft indicators or robust employment figures could undermine this cautious outlook. Additionally, if hard data begins to reflect a downturn, it would invalidate the current bullish stance, prompting a quick repositioning in markets.
We are back now with the next installment of our ongoing monthly macro podcast series with colleagues from UBS Asset Management. On a monthly basis, we do look forward to hearing from the top investment professionals from the UBS Asset Management multi-asset team. With that, fortunate to have with us on the line today, welcoming back Evan Brown, portfolio manager and head of multi-asset strategy.
We're also joined today by investment strategist, Fatou Kante. With that, Evan, Fatou, thank you for spending some time with our listeners today. Fatou, let me pass it over to you to lead the conversation with Evan.
Welcome back. Thanks, Dan. It's great to be back here again with Evan.
Welcome everyone. Today, we'll dive into what's happening in the global economy. We'll touch on the latest on U.S. policy, and then lastly, we'll speak about how investors should be thinking about equities, fixed income, and global diversification right now.
Evan, with that being said, what do the latest U.S. macro data releases indicate about the strength and trajectory of this economic cycle that we're currently in? Yeah, thanks, Fatou. There are two types of data out there.
There's soft data and hard data. The soft data is essentially surveys of consumers, of businesses, and the hard data is what's happening right now in the economy. That's employment, spending, et cetera.
The soft data looks quite poor. If you look at consumer confidence, if you look at measures of business confidence and capex intentions and the like, those have really deteriorated. We do take some signal in that.
I think when you have the private sector sounding more cautious than typically, you'll see activity slow. The soft data can be a leading indicator for the hard data, but you also don't want to overstate it. In the end, you really want to focus on what people do as opposed to too much on what they say.
In fact, in 2022, beginning of 2023, the soft data was terrible, and the hard data ended up being just fine in the end. It's a mixed picture, but fair to say that the ongoing uncertainty with tariffs is weighing on sentiment, and it's likely to weigh on the hard data soon. First of all, we are going to see inflation prints start to, over the course of the summer, rise as a result of the tariffs, just higher cost of good imports, and then that is likely to lead to some pullback in consumer spending.
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