UBS On-Air: Market Moves Top of the Morning: CIO Strategy Snapshot - What comes next?
May 19, 2025
Jason Draho, Head of Asset Allocation Americas at UBS, shares his insights on the recent rally in US equities following improvements in US-China trade relations. He discusses the implications of Moody’s downgrade of the US credit rating and how it could affect congressional budgets and fiscal policy. Draho dives into the dynamics of rising interest rates and their impact on market conditions. He highlights asset allocation strategies, suggesting a focus on technology and AI stocks, while also recommending gold as a safe haven amidst geopolitical uncertainties.
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Moody's US Credit Downgrade Insight
- Moody's downgrade of the US credit rating reflects known fiscal concerns, like rising national debt and debt service costs.
- It's a reminder but likely a short-term market event as investors have largely priced in these fiscal risks already.
US Budget Bill's Fiscal Impact
- Congressional Republicans push a budget reconciliation bill aiming for early July approval despite fiscal concerns.
- The bill risks expanding deficits due to front-loaded tax cuts and delayed spending cuts, adding fiscal stimulus.
Equity Rally Drivers and Risks
- Recent equity rally stems from tariff truce easing trade war fears and positive fiscal policy signals.
- Market optimism may be premature as risks from economic data and trade uncertainties remain clear.