What do de-escalating tariffs mean for markets?
US stocks have nudged back into positive territory amid optimism that the worst of the trade war is over. But the outlook remains uncertain. We believe phasing into stocks can be an effective approach for under-allocated investors.
Investment view
Our base case is that US effective tariffs will settle in the 15% region. US growth will slow but the economy should avoid a full-blown recession. We believe investors can mitigate near-term market timing risks through phasing strategies or through capital preservation strategies. We also believe that gold, quality bonds, and hedge funds represent valuable portfolio diversifiers.
Related insights
Livestreams
New in recent weeks
President Donald Trump will impose tariffs at the rate he threatened in early April on trading partners that do not negotiate in "good faith" on deals, Treasury Secretary Scott Bessent said in television interviews over the weekend. But he did not say what would constitute "good faith" negotiations or clarify the timing to announce any decisions to return a country to the various rates Trump initially imposed on 2 April.
Following the first publicized, in-person talks with China, US Treasury Secretary Scott Bessent stated the two countries "are in agreement that neither side wants to decouple.” He highlighted the creation of a mechanism for continued talks to prevent renewed trade tensions between the world's two largest economies.
US President Donald Trump said in a television interview over the weekend that he is willing to lower tariffs on China at some point. Last week, China's commerce ministry said that the Trump administration has reached out to initiate trade talks, adding that Beijing's door is open for discussions.
Did you know?
We rate US equities as Neutral but still expect the S&P 500 to rise over the next 12 months. Investors who were underallocated to US stocks going into this year's sell-off, or who are willing to take on near-term risk for potential long-term reward, can consider ways to build long-term exposure.- One way to mitigate market entry risks is by using a phase-in strategy. Since 1945, phasing into a balanced 60/40 portfolio over 12 months has outperformed cash in approximately 74% of one-year periods and 83% of three-year periods. When initiated after a market decline of over 10%, this strategy outperformed cash in 82% of one-year periods and 94% of three-year periods.
- We continue to see strong long-term potential in our TRIOs—Artificial intelligence, Longevity, and Power and resources.
Get in touch
Are you a client?
Become a UBS client
Disclaimer
Global asset class preferences definitions
The asset class preferences provide high-level guidance to make investment decisions. The preferences reflect the collective judgement of the members of the House View meeting, primarily based on assessments of expected total returns on liquid, commonly known stock indexes, House View scenarios, and analyst convictions over the next 12 months. Note that the tactical asset allocation (TAA) positioning of our different investment strategies may differ from these views due to factors including portfolio construction, concentration, and borrowing constraints.
Most attractive – We consider this asset class to be among the most attractive. Investors should seek opportunities to add exposure.
Attractive – We consider this asset class to be attractive. Consider opportunities in this asset class.
Neutral – We do not expect outsized returns or losses. Hold longer-term exposure.
Unattractive – We consider this asset class to be unattractive. Consider alternative opportunities.
Least attractive – We consider this asset class to be among the least attractive. Seek more favorable alternative opportunities.
Note: For equities, we have collapsed “Most Attractive” with “Attractive” and “Least Attractive” with “Unattractive” from the five-tier rating system that is found in the Equity Compass into three tiers.