Sergio Ermotti, CEO of UBS
Stefan Warmus | Bloomberg | Getty Images
Sergio Ermotti, chief executive of UBS in Zurich, Switzerland, said on Wednesday that market volatility may intensify in the second half of the year, but he does not believe the United States is entering a recession.
Global stocks sold off sharply last week as investors digested weak U.S. economic data, raising fears of a recession in the world’s largest economy. It also raises questions about whether the Fed needs to become less hawkish on its stance on monetary policy. At the end of July, the central bank kept interest rates at a 23-year high.
Asked about the outlook for the U.S. economy, Ermotti said: “There’s not necessarily a recession, but a slowdown is definitely possible.”
“The macroeconomic indicators are not clear enough to talk about a recession, and indeed, it may be too early. What we do know is that the Fed will be well-positioned to step in and support a recession, although it will take time, regardless of whether they What does that transmit to the economy,” the bank’s CEO told CNBC on Wednesday. report Second quarter results.
UBS expects the Fed to cut interest rates by at least 50 basis points this year. According to LSEG data, traders currently have mixed views on whether the Federal Reserve will cut interest rates by 50 to 25 basis points at its next meeting in September.
Ermotti told CNBC that we may see greater market volatility in the second half of the year, partly due to the U.S. election in November.
“That’s a factor, but if I look at the overall geopolitical picture, if I look at the macroeconomic picture, the volatility that we’ve seen over the past few weeks, it seems to me that this is a clear change in the system. Signs of fragility in certain elements … one would certainly expect higher levels of volatility,” he said.
Another uncertainty going forward is monetary policy and whether central banks will have to cut interest rates more aggressively to combat the economic slowdown. In Switzerland, where UBS is headquartered, the central bank has cut interest rates twice this year. The European Central Bank and the Bank of England have both announced one rate cut so far.
“Knowing the upcoming unknown events such as the U.S. presidential election, we feel complacent with very low volatility,” Bruno Verstraete, founder of Lakefield Wealth Management, told CNBC on Wednesday. , now we are moving to a more normal system.
“As far as UBS is concerned, (greater volatility) is not necessarily a bad thing because greater volatility means more trading revenue,” he added.
