UBS On-Air: Market Moves

Join Paul Hsiao, an expert Asset Allocation Strategist at UBS, as he navigates the intricate landscape of the U.S. economy. He dissects the impacts of the ongoing government shutdown on economic activity and consumer confidence. Hsiao also reveals concerning trends in the labor market, highlighting weakening job growth and alternative indicators. With insightful predictions for Fed monetary policy, he anticipates rate cuts into 2026, emphasizing significant personnel changes at the Fed and their implications for the market.

Today’s market dynamics are clouded by a US government shutdown, which hides crucial employment data. This situation complicates understanding labor market signals, heightening concerns about the economic outlook. Paul Donovan discusses how low fear of unemployment is essential in preventing recession and critiques government estimates of shutdown costs. He also highlights that while activity might shift due to shutdowns, the real worry lies in lasting impacts from layoffs. Additionally, he touches on international market reactions, notably concerning Argentina's economic stability.

Dan Hyman, a Senior Portfolio Manager at PIMCO specializing in fixed income, joins UBS's Leslie Falconio to delve into the intricacies of the mortgage-backed securities market. They discuss the slow normalization of agency MBS and its ties to reinvestment benefits. Hyman shares insights on the Fed's anticipated easing and its impact on mortgage demand. The duo also explores historical mortgage performance during recessions and the current dynamics affecting refinancing behaviors, offering a nuanced view on adding agency MBS to investment strategies.

The ongoing US government shutdown stirs concern as President Trump hints at potential firings of federal workers. This could elevate unemployment fears, impacting consumer behavior and spending habits. Despite these challenges, the relatively small federal workforce means limited economic fallout. Meanwhile, uncertainties linger for businesses reliant on government interactions. In international news, the Argentine peso weakens, complicating US assistance amidst intricate trade ties with China.

Shane Lieberman, a Senior Governmental Affairs Advisor at UBS, shares his insights on the current U.S. government shutdown and its broad implications. He discusses which services remain operational and the potential impact on federal paychecks. Shane also highlights the recent Oval Office announcement on drug pricing, particularly a deal with Pfizer that includes tariff relief in exchange for price reductions. He anticipates that other drugmakers may follow suit with similar agreements, stirring significant changes in the pharmaceutical landscape.

Alejo Czerwonko, Chief Investment Officer for Emerging Markets Americas at UBS, shares his insights on the importance of the Fed’s rate-cutting cycle for emerging market investors. He highlights promising opportunities in equities, fixed income, and currencies, emphasizing fair valuations and solid earnings in markets like China and India. Alejo also discusses key risks such as potential US inflation and global economic slowdowns that could impact emerging market performance, making it a must-listen for investment enthusiasts.

The potential US government shutdown leaves economists without crucial official data, relying heavily on narrow private-sector information. Paul Donovan highlights the limitations of this data, emphasizing its dependency on official statistics for broader economic insights. He also discusses the implications of a blocked Bureau of Labor Statistics nominee and dives into the latest trends in euro-area inflation and Japanese capital spending. Plus, South Korean exports show surprising semiconductor strength, despite an overall year-on-year decline.

In this discussion, Jason Draho, Head of Asset Allocation Americas at UBS, shares insights on the U.S. economy's surprising resilience, citing strong consumer spending and revised GDP growth figures. He tackles the impact of government shutdown risks, detailing potential economic effects and the negotiation dynamics at play. Draho also explains the recent S&P pullback due to AI financing news and offers strategic investment advice, encouraging buying dips in equities and gold while favoring high-quality fixed income.

The UK sees a surprising boost in GDP, officially ranking as the fastest growing G7 economy. With consumers now saving more, there's potential for future spending, despite inflation pressures from retailers. Meanwhile, early inflation data from the Eurozone is on the horizon, but the market remains unfazed. The threat of a US government shutdown looms, casting doubt on crucial data releases and potentially allowing unnoticed price hikes. Lastly, proposed tariffs on furniture hint at shifting consumer behavior.

Join Jeffrey Gundlach, CEO and Chief Investment Officer of DoubleLine Capital, as he dives into the complex landscape of markets and monetary policy. He discusses how tariffs might hinder the Fed's inflation goals and the vital role of the two-year Treasury in shaping rate decisions. Gundlach shares insights on the impact of political dynamics on future Fed policies and highlights significant economic indicators that could signal recession risks. He also advocates for local-currency emerging market bonds and emphasizes the importance of gold and real assets in current portfolios.