UBS has introduced the concept of a "no landing" scenario for the US economy, suggesting that growth will persist while inflation remains stable.
Recent labor market data and GDP growth figures have exceeded forecasts, indicating a resilient economic environment.
UBS's analysis points to a unique economic trajectory where inflation trends toward the Federal Reserve's target, allowing for potential rate cuts while maintaining economic momentum.
The Federal Reserve's aggressive rate hikes in 2022 were aimed at curbing high inflation and managing robust economic growth.
UBS proposes an alternative path, suggesting that the economy could experience sustained growth alongside manageable inflation.
Recent data supports this perspective, with the labor market showing unexpected resilience.
GDP growth has averaged 2.5% annually since 2019, and retail sales have demonstrated a 0.4% increase, reflecting healthy household finances and income gains.
Inflation is moving closer to the Federal Reserve's target, which could provide the central bank with the flexibility to implement further rate cuts.
UBS anticipates increased market volatility as the US presidential election approaches but remains optimistic that this will not undermine the broader economic momentum.
UBS analysts caution against making hasty assumptions about stock market outcomes based solely on individual policies and emphasize the importance of considering the broader context of what can realistically be implemented and the sequence of actions that may follow.