UBS CEO Sergio Ermotti stated on Wednesday that while market volatility is likely to increase in the second half of the year, he does not foresee an imminent recession in the United States. Despite recent concerns stemming from weak U.S. economic data, which sparked fears of a downturn and led to significant sell-offs in global equities, Ermotti remains cautiously optimistic.
He acknowledged the potential for an economic slowdown but emphasized that current macroeconomic indicators do not clearly point to a recession. “It’s probably premature to discuss a recession,” Ermotti remarked, highlighting the Federal Reserve’s capacity to intervene if necessary, although the effects of any such measures may take time to manifest in the economy.
UBS anticipates that the Federal Reserve will reduce interest rates by at least 50 basis points this year. Market expectations are currently divided between a 50 and 25 basis point cut at the Fed’s upcoming meeting in September.
Ermotti also noted that higher market volatility is expected in the latter half of the year, influenced by factors such as the upcoming U.S. presidential election and broader geopolitical uncertainties. He described recent volatility as a sign of the fragility within certain elements of the financial system and suggested that a more volatile environment could benefit UBS by increasing trading income.
In a broader context, Ermotti’s comments reflect a cautious approach to navigating potential economic headwinds, while acknowledging the unpredictability of monetary policy and its impact on markets. As UBS navigates this landscape, it remains vigilant in responding to evolving economic conditions and market dynamics.
