With a «Thought of the Week,» UBS aims to connect with its clients every Monday morning. The author is Daniel Kalt, chief economist and chief investment officer of UBS Switzerland. The first edition addresses the biggest uncertainty in financial markets in the second half of 2024.
In his initial post (available in German only), Daniel Kalt anticipates that the second half of 2024 will be «somewhat challenging.»
«The fairly ambitious expectations of further rising corporate profits, which are now priced into higher valuations, must be confirmed. This should be achievable – at least as long as the US economy does not experience a hard landing,» Kalt said.
Furthermore, equity markets would be buoyed if, in addition to all the central banks that have already switched to a rate-cutting cycle, the US Federal Reserve also initiates the first rate cuts in the fall. Given the recent more pronounced weakening trends in many US economic indicators, this seems increasingly likely, Kalt adds.
As Unclear as Rarely Before
However, the greatest uncertainty for the markets is likely to come from the geopolitical level, according to UBS. In Europe, elections in the UK and France have led to a shift in power dynamics. The political situations in many Western democracies are as unclear as rarely before, writes Kalt.
In the US, voters remain polarized. The candidates offer contrasting views on issues such as immigration, globalization, taxes and US foreign relations.
Cards Reshuffled
«We recently published a report examining the impacts of different election outcome scenarios in the US on various market segments (ElectionWatch 2024),» Kalt writes.
With Joe Biden's announcement over the weekend that he will not run in the US presidential race, the cards are likely to be reshuffled. It is possible that, besides Kamala Harris, another candidate might enter the race at the Democratic National Convention next August.
