UBS On-Air: Market Moves

The fourth industrial revolution is a significant structural upheaval—and structural change tends to encourage scapegoat economics and prejudice politics. Those trends have been on display this week, in the form of economic nationalism. The US Congress is terrified China will uncover the secrets of how to dance on TikTok. China’s trade envoy was warning Europe not to follow US trade sanctions. Europe will pursue its own economic nationalist course, no doubt.

As our ‘Year of Inflections’ continues to evolve, events over the past month have shown how quickly the outlook can shift. With uncertainty in the banking sector still high, and question marks about the economic and central bank outlook, markets are likely to remain volatile in the months ahead. Against this backdrop, we focus on strategies that are building resilience, mitigating risks, positioning for opportunities created by regional divergences, and diversifying portfolios.

Spain and Germany issue initial estimates for March consumer price inflation. These numbers are likely to slow quite significantly (especially for the year-over-year comparison). The second wave of inflation—energy prices—starts to drop out of the calculation. What is left is profit margin-led inflation (if companies earned normal profit margins, there is little question inflation would be meaningfully lower).

Our conversation outlines the investment case for commodities and areas of opportunity for consideration. We dive deep into where we are in the commodities cycle, how to invest in the asset class, and the risks to be mindful of. Featured are Jason Draho, Head of Asset Allocation Americas with the UBS Chief Investment Office, and Al Chu, Portfolio Manager with Newton Investment Management (BNY Mellon). Host: Daniel Cassidy

Swedish supermarkets are cutting food prices, after growing concerns about the extent of (profit-led) inflation. This is not just slower inflation, but outright deflation with price increases and profit margin expansions being reversed. It follows similar moves in Norway last month. If consumers are no longer prepared to live in a pricing power fairy tale, believing the stories retailers tell to justify margin expansion, disinflation or deflation can swiftly follow.

The UK British Retail Consortium's shop price index rose on food prices. The accompanying commentary was textbook for profit-led inflation. Poor harvests and sugar prices were blamed. When profits (rather than demand) lead inflation, retailers need to have a story that convinces consumers that the price increases are "fair". Consumers mistakenly think food prices are related to agricultural prices, which conveniently hides things like the 50% increase in the markup on consumer milk prices in...

As we embark on a new week, we take a temperature on investor sentiment and discuss a near-term market outlook. We also outline the latest asset allocation recommendations from the UBS Chief Investment Office, and examine the road ahead of monetary policy. Featured is Jason Draho, Head of Asset Allocation Americas, UBS Chief Investment Office. Host: Daniel Cassidy

What have we learned this week? Remarkably little. Economists have been wrestling with real-time economic data that has become progressively less reliable as structural change has swept the economy. Now the aftermath of the first bank runs of the Twitter era only adds uncertainty. The future depends on two hard-to-predict behaviors: will bank investors and depositors keep moving their money? And if they do, will loan officers respond by tightening lending standards? Central banks will know...

Economics now enters a limbo period. The data flow that we get over the next few weeks relates to the period before the recent financial volatility. There is considerable uncertainty over how the real economy is affected by that volatility. The optimistic case is that larger banks do not tighten bank lending standards dramatically, and consumers carry on more or less as before. The pessimistic case is that lending standards tighten, consumers are forced to spend using only their falling real...

Featured are Jeremy Zirin, Head of the Private Client US Equity Team, and Dominic Schagar, Senior Equity Investment specialist, UBS Asset Management.

Our conversation recaps yet another eventful week in the markets, including takeaways from the Fed meeting and press conference, along with an update on the banking system crisis. We also outline the equity positioning changes per the April edition of the UBS House View, and preview what you can expect in the week ahead. Featured is Matt Tormey, Equity Strategist Americas, UBS Chief Investment Office. Host: Daniel Cassidy

Our conversation recaps this week’s notable summit in Moscow, the Congressional testimony delivered by the TikTok’s CEO, rumblings surrounding an increase to the FDIC insurance cap and more. Featured is Shane Lieberman, Federal Affairs Manager, UBS US Office of Public Policy. Host: Daniel Cassidy

The Federal Reserve raised rates 0.25% yesterday, as expected. Fed Chair Powell signaled they may be close to the end of the rate hiking cycle—acknowledging stricter bank lending standards are a form of tightening. Arguably the longest policy error since New York Fed President Strong in the 1920s is nearly over (the error was not the rate hikes, but the fanatical "hike, hike, hike" mentality without pausing to assess the damage being done).

Our conversation outlines developments surrounding the EU’s Green Deal Industrial Plan, outlines the progression of ‘green transportation’ and touches on the global rise in energy prices and the role renewables can play. Featured are Amantia Muhedini, Sustainable and Impact Investing Strategist Americas with the UBS Chief Investment Office, and Jens Peers, Chief Executive Officer and Chief Investment Officer of Mirova. Host: Daniel Cassidy

Our conversation outlines the current longer-term thematic preferences of the UBS Chief Investment Office, including a look at two recent additions, ‘Aging in comfort’ and ‘Education services’. Featured is Michelle Laliberte, Thematic Investing Strategist, UBS Chief Investment Office. Host: Daniel Cassidy

The Federal Reserve delivers its policy decision today. Estimates of the outcome should not be described as forecasts—economists can only guess at what will happen. The fact that we are guessing policy for the world’s reserve currency is the result of the Powell Fed’s comedy of errors.

With a very fluid and market moving macro environment, Brian Rose and Ed Kerschner join us to share their views and thoughts around the state of the US economy, the road ahead for monetary policy and the investment implications to be mindful of. Featured are Brian Rose, Senior Economist Americas, UBS Chief Investment Office, and Ed Kerschner, Chief Portfolio Strategist, Columbia Threadneedle Investments. Host: Daniel Cassidy

Alejo Czerwonko joins our 1285 podcast studio to share his recent exciting news of being named to the World Economic Forum’s Young Global Leaders program. Listen as Alejo explains how his work here at the UBS Chief Investment Office, along with his roles in academia and global think tanks, will shape his contributions to the program, plus what he plans to take away and apply from the experience. Featured is Alejo Czerwonko, Chief Investment Officer for Emerging Markets Americas, UBS Chief...

Chief Investment Officer Mark Haefele and colleagues from around the world discussed the implications of the recent events in the global banking sector for central banks, economies and markets.

Early March export data from South Korea showed a fairly large drop in exports, led by weakness to China. The fact that developed economy consumers have been prioritising service sector spending over goods spending is well established—and record global manufacturing supply is meeting slowing goods demand. However there are some signs that a floor may be close.