UBS Investor Forum

Challenging the UBS House View

Every month, we invite global investment leaders from the fund management industry to challenge our UBS House View. We address global financial questions to make sure we never sin through over-confidence.

Global investment leaders share their views on the UBS Investor Forum

Podcast #005

Larry Hatheway, GAM


Fed expectations


In this podcast, Larry Hatheway, Head of Investment Solutions and Chief Economist at GAM, and Mark Haefele, Chief Investment Officer at UBS Wealth Management, discuss the growing expectations that the Fed will cut rates and how investors should position in this market environment.

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This month's discussion was all about the market pricing of Fed cuts

Outside View

  • All participants agreed on the market pricing of Fed cuts being too aggressive. One participant assigned a 50% probability to the realization of the currently priced in cuts.
  • Most participants expect the economy to somehow muddle through 2019 and do not expect a recession 2020. However, one participant saw a 50% probability of a recession in 2020.
  • Participants identified the global manufacturing sector as a weak link while pointing out that it is only a small part of developed market economies.

UBS House View

  • We expect the Fed to cut rates by 50 basis points, most likely at the next FOMC meeting on 31 July. But this is a close call and we still see a significant chance that the Fed will remain on hold.
  • Current rates of consumption, investment, and job growth in major developed markets do not point to an impending recession. The risk of a US recession over the next 12 months, according to the New York Fed model, is still low at 30%.
  • Manufacturing output has surprised to the downside year to date and will be restrained by excess inventories and soft external demand.

How much will the Fed cut rates in 2019?

Poll Form

Read the full report in our Briefcase

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