UBS On-Air: House View

Welcome to CIO Jumpstart, your guide to the main market events coming up in the week ahead. Today we ask the following three questions: 1. Will inflation temper the Fed’s hawkish turn? 2. Will the ECB signal that its hiking cycle will be limited? 3. Can market gains continue to broaden beyond technology?

Economic growth has stayed resilient, earnings are strong, and AI-related investment continues to support activity. Against that backdrop, the possibility of rate hikes has increased, supported by comments from Fed officials that inflation may not be moving down fast enough. But investors should not mistake a potential change in Fed policy for a change in the investment outlook. If rates move higher while economic growth, employment, and profits remain strong, many of the forces supporting portfolios should remain intact. We maintain a constructive view on global equity markets.

Broadcom’s stronger AI-chip outlook has reinforced confidence that demand for AI infrastructure remains robust. But elevated government bond yields, geopolitical risks, and the potential for excessive reliance on a narrow group of technology stocks reinforce the importance of diversification. Against this backdrop, we advise investors to position for further market gains by broadening equity exposure, considering capital preservation strategies, and investing in the power, resources, and infrastructure required to support the AI buildout.

Rising oil prices and shifting central bank expectations have pushed global yields higher, but currency markets are responding selectively. We favor carry opportunities backed by sounder fundamentals, and believe investors should focus on building robust, diversified, and risk-managed portfolios.

Renewed conflict in the Middle East and elevated oil prices have intensified pressure on global bond markets. We expect volatility to persist, but see scope for short-dated yields to decline as inflation moderates and the Fed remains on hold.

Welcome to CIO Jumpstart, your guide to the main market events coming up in the week ahead

Investors are looking to Fed Chair Kevin Warsh’s Jackson Hole speech for clues on the path of interest rates. But sticky inflation, geopolitical risks, and strong AI investment could keep policy uncertainty elevated.

This week's pullback in longer-term interest rates looks more like a pause than a reset. Behind the move sits a deeper shift in how investors price growth, policy uncertainty, and government debt.

As investors look to NVIDIA’s earnings later today, we see supportive AI fundamentals across demand, monetization, and earnings trends. We continue to favor a selective, diversified allocation focused on AI enablers and defensive technology segments.

Markets have continued to climb higher, supported by strong corporate earnings, robust AI-related investment, and expectations that inflation can ease gradually. But the outlook is not dependent on one factor alone. The durability of AI capex, evidence of monetization, the breadth of earnings growth, and the path of inflation and monetary policy will all be important in determining whether the constructive backdrop can continue. To discuss the latest market developments and portfolio implications, Kiran Ganesh, Global Head of Investment Communications, will be joined by Frederick Mellors, Head Fixed Income GAA, Rolf Ganter, Head CIO Equities Europe, and Andrew Dubinsky, US Senior Economist. Together, they will examine the key forces shaping markets into year-end, the scenarios that could support or challenge further upside, and how investors can position portfolios to participate in opportunities while remaining resilient across a range of outcomes.