UBS: Global fundamentals trending positively, on track for two rate cuts this year
Although data and comments from Federal Reserve officials may suggest otherwise, the big picture still shows that global fundamentals are trending positively, with the global cycle and earnings revisions inflecting higher, UBS strategists said Monday.
“This performance collectively looks “risk off” as much as “risk on” despite the equity gains,” UBS highlighted. After a period of high inflation, the last two months of data have renewed confidence in disinflation. However, recent growth data is mixed. While May payrolls exceeded expectations at 272,000, other labor market indicators show cooling. Initial jobless claims rose to their highest level since August, and the University of Michigan Consumer Sentiment Index declined, raising concerns about consumer spending resiliency.
Regarding the Fed dots, investors may wonder why the FOMC didn't opt for two rate cuts to maintain flexibility. However, the one-cut median hasn't significantly impacted market pricing, which still anticipates two cuts by December. Fed Chair Jay Powell downplayed the projections, saying that “these projections are not a committee plan or any kind of decision.”
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