UBS On-Air: Market Moves

This week Jason ‘connects the dots’ to make sense of market performance, this in the wake of last week’s inflation data, along with the outcome of the June FOMC meeting. We also consider emerging geopolitical risks, and upcoming macro factors. Plus, share CIO’s current investment outlook and positioning recommendations. Featured is Jason Draho, Head of Asset Allocation Americas, UBS Chief Investment Office. Host: Daniel Cassidy

China’s May data dump showed weaker-than-expected industrial production, despite earlier reports of stronger exports. Domestic retail sales were stronger, slightly distorted by the timing of holidays. Restaurant sales were stronger, as people seem inclined to spend on having fun.

Yesterday’s US producer price inflation numbers added to a general sense of disinflation. However, the lower inflation reported in consumer and producer prices will not be fully experienced by consumers. The slowing fantasy price of owners’ equivalent rent does not affect real world spending power. Seasonal adjustments deliberately distort reality, and so disinflation here does not change consumers’ inflation experiences.

Shane Lieberman, Senior Governmental Affairs Advisor, discusses upcoming Supreme Court rulings, primaries, and former President Trump's visit to Capitol Hill. The podcast also covers analysis of the November election, bipartisan unity at the Congressional baseball game, and insights on elected officials bonding over baseball.

Topics discussed include potential timeline for higher rates in the US, G7 Summit, law of acceleration impact, Fed policies on market expectations, China's economic influence, role of innovation, renewable energy, technological advancement, artificial intelligence, and engaging discussions with Burkhard Varnholt

The Federal Reserve did nothing on rates. Investors have desperately sought additional guidance on policy, putting the fabled dot plots in focus. These black smudges on a piece of paper are really not that helpful. More Fed members think that there will be two cuts this year than anything else. Given the disinflation forces in the economy, several of those who suggested one cut likely give a high probability to two cuts.

UBS On-Air: Market Moves discusses May CPI data and FOMC meeting, analyzing market response. Experts predict Fed rate cut in September based on favorable data. Exploration of preferred sectors, small caps, and fixed income markets for investment positioning guidance.

Economists are overstimulated by the US today. We have the excitement of US consumer price inflation. We have the excitement of a Federal Reserve policy decision. Fed Chair Powell’s press conference can be relied upon to dampen economists’ passions. The Fed is unlikely to change policy. The fabled dot plots of policy projections will add confusion (a black mark on a chart gives no sense of confidence or risk).

Leslie Falconio and John Murtagh of UBS CIO discuss fixed income performance drivers, rate volatility, Fed rate cut expectations, upcoming FOMC meeting, US monetary policy, and recommendations for fixed income investors in agency MBS, investment-grade corporates, tips, treasuries, and munis for incremental income and price appreciation.

Financial markets dislike any increase in uncertainty. Politics in Europe was judged to have increased uncertainty, and markets responded accordingly. It is the change in uncertainty that matters. The outcomes of the thousands of US elections held this November are also a source of considerable uncertainty, but, perceptions of that level of uncertainty are not changing very much.