UBS believes the market may have overestimated the extent of the Federal Reserve’s subsequent tightening

Article

UBS: The Fed is unlikely to raise rates consecutively; market pricing of the tightening path is overly aggressive

BlockBeats News,September 25, UBS Chief Investment Officer Mark Haefele and his team stated that market pricing of the Fed's tightening path is overly aggressive, and the actual extent of rate hikes may be less than expected. 10-year U.S. Treasury yield broke above 5.1%, after which federal funds futures showed that the probability of a October rate hike rose to 70%, but UBS's base-case scenario remains that the Fed will December raise rates once more and then keep rates unchanged.

UBS expects the Bureau of Economic Analysis's annual revisions to lower core PCE inflation by 0.2 percentage points. Combined with favorable base effects in the first half of next year, inflation may decline steadily over the next 6 months. The median interest-rate projections of Fed officials also indicate that rates will remain unchanged throughout 2027, weakening the basis for consecutive large rate hikes.

UBS also believes that the September U.S. composite PMI rose to 58.4, indicating that economic activity remains resilient and supporting corporate revenue and profit growth. The institution maintains an "attractive" rating on fixed-income assets and expects earnings for the S&P 500 Index to grow this year and in 2027 by 25%and 14%, respectively. For gold, UBS believes it continues to face pressure from high interest rates and a strong USD, but views a pullback in gold prices to around 4000 USD per ounce as an opportunity to increase holdings, and expects it to rise to 2027 in September or thereabouts.

Original link 5400 USD.

Original link https://m.theblockbeats.info/flash/368980

Key points

UBS Chief Investment Officer Mark Haefele and his team said that the market’s pricing of the Federal Reserve’s tightening path is too aggressive.
10-year U.S. Treasury yield broke above 5.1%, after which federal funds futures showed that the probability of a October rate hike rose to 70%。
UBS's base-case scenario is that the Fed will December raise rates once more and then keep rates unchanged.
UBS expects core PCE inflation may be lowered by 0.2 percentage points, and inflation may steadily decline over the next 6 months.
September The U.S. composite PMI rose to 58.4。
UBS maintains an “attractive” rating on fixed-income assets and expects the S&P 500 Index this year and 2027 earnings to grow by 25%and 14%。
UBS believes that a pullback in gold prices to around per ounce 4000 USD may be a buying opportunity, and expects 2027 to rise to around September by 5400 USD。

AI-assisted interpretation

The following is analysis, separate from reported facts. Verify important claims independently.

This is UBS’s assessment of future interest rates and asset prices, not a policy decision already made by the Federal Reserve. UBS believes inflation may decline, so the basis for continued, substantial rate hikes is weakening; however, short-term high interest rates and strong USD may still weigh on gold.

Why it matters to readers

If expectations for subsequent rate hikes weaken, interest-rate pressure may ease, which could be relatively favorable for U.S. equity valuations and financing conditions; however, this still depends on inflation, employment data, and the Federal Reserve’s statements.

Rate hikes affect borrowing costs, stock valuations, and gold performance. The key point is that UBS believes the rate-hike path expected by the market may be more aggressive than the actual path.

Risks and unknowns

The content is a second-hand account by BlockBeats of UBS's view and does not include UBS's original report or official Federal Reserve materials.
UBS's content regarding future interest-rate hikes, inflation, earnings, and gold prices is all forecast-based and has not yet been validated by subsequent data.
Evidence does not specify October The specific observation time and calculation details for the probability of an interest rate hike.
The evidence does not establish that UBS’s anticipated path of declining inflation and easing tightening will materialize.

UBS believes the market may have overestimated the extent of the Federal Reserve’s subsequent tightening

Article

AI-assisted interpretation

Why it matters to readers

Risks and unknowns

Related Developments

Related concepts

Keep following

Security Center