UBS On-Air: Market Moves
Macro Monthly Podcast with UBS Asset Management
Nov 8, 2023
Hear from investment professionals Evan Brown and Enrique Davila in this month's Macro Monthly Podcast. They discuss the recent stock market correction, concerns of tightening financial conditions, rising bond yields, and geopolitical shocks. They also talk about the current state of the economy, signs of cooling and lowering guidance from corporations, and the impact of housing market activity and student loan repayments on growth. They expect a year-end rally after a moderation that stabilizes yields.
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Quick takeaways
- The recent stock market correction was driven by a strong economy and increased U.S. government bond yields, leading to reduced equity risk premiums and challenging valuations.
- To recover, the market needs signs of economic cooling and a stabilization in yields, with a potential rally expected into year-end.
Deep dives
Stock Correction and Rising Yields
The recent 10% correction in stocks was driven by the economy being too strong, leading to an increase in U.S. government bond yields. Concerns about the Fed taking more actions to battle inflation further fueled the correction. The rise in yields negatively affects stocks by reducing equity risk premiums and challenging relative valuations. Additionally, the tightening of financial conditions due to higher yields can weigh on future growth. Other factors contributing to the correction include higher treasury issuance and geopolitical shocks like the terrorist attack in Israel and war in Gaza.
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