UBS On-Air: House View

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...

Renewed concerns about US government finances are adding pressure to the dollar. Gold, broad commodities, and select global currencies can help investors diversify dollar exposure and build more resilient portfolios.

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

As long-term yields remain elevated, market adjustments may increasingly occur through currencies and commodities rather than bonds alone. A weaker US dollar could support gold and help ease financial conditions, while underpinning a diversified investment approach.

Markets have welcomed signs that US policymakers are willing to respond when bond volatility rises too far, too fast. But we think lasting stability in bond markets will ultimately depend on the underlying inflation, fiscal, and demand backdrop.

Global equities have remained under pressure amid concerns over higher bond yields, rising oil prices, and the outlook for AI capital spending. But we believe the outlook for stocks remains positive. Underlying inflation remains under control, and earnings growth has picked up. Against this backdrop, we continue to view equities as Attractive.

The recent rise in long-term yields reflects new bond supply and persistent concerns over inflation and deficits. We do not think this undermines the case for quality fixed income, but it does strengthen the need to focus on shorter- and medium-maturity bonds, where we see an attractive risk-reward.

Implied volatility may not stay low for long, but resilient economic data, strong corporate earnings, and the prospect of a steady Fed should continue to support our positive view on risk assets.

Cooling US inflation has helped global stocks reach new highs, but concentration risks remain elevated. We see opportunities to diversify across Europe, Japan, and Asia, supported by earnings resilience, improving cyclical momentum, and structural growth trends.

Higher oil prices have tempered investor sentiment ahead of July’s CPI report. We expect core inflation to trend lower in the coming months, allowing the Fed to hold interest rates steady. This would be supportive of our preference for short- and medium-duration quality fixed income.

NVIDIA’s financing push has raised fresh questions about circularity in the AI trade, but strong cloud demand and rising advance orders continue to support our constructive view. We continue to recommend diversified exposure.

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

Renewed uncertainty over the reopening of the Strait of Hormuz has pushed oil prices and bond yields higher, reviving concerns that the Federal Reserve may need to tighten policy. Policymakers have made clear that they are willing to raise rates if inflation remains too high. But we believe moderate labor-market slowing and further underlying disinflation will allow the Fed to remain on hold this year.

Gold has risen to its highest level in seven weeks, and we think the medium- to longer-term case for holding the metal remains supported by lower real rates, a softer dollar, and central bank buying. We continue to see a role for gold in diversified portfolios.

Recovering sentiment toward the AI trade, strong earnings results, and signs of diplomatic progress in the US-Iran conflict pushed equities higher on Tuesday. Continued AI investment, broadening earnings growth, and a patient Fed support our constructive view on equities.

The AI story is evolving beyond a narrow tech trade. We see opportunities across the broader value chain, from power to chips to health care.

July brought a sharp reminder that geopolitical risks, inflation concerns, and crowded trades can still unsettle markets. Even so, stronger earnings, moderating inflation, and resilient demand should help sustain a constructive backdrop for diversified investors.

AI investment and monetization, resilient US growth, and a patient Fed should help keep the US equity rally on track. We believe investors should remain broadly diversified to capture opportunities beyond tech as market leadership continues to widen.

The latest hyperscaler earnings point to strong capital expenditures in the near term and encouraging monetization trends. But pressure on cash flows could lead to a slowdown in capex beyond next year. We think the AI investment opportunity has become more differentiated, and recommend exposure to select semis and defensive tech.

After months of geopolitical uncertainty and heightened market volatility, markets have been quick to respond to both signs of de-escalation and fresh sources of tension. Yet the outlook remains far from straightforward. Questions around the durability of the AI-driven market rally, the path of inflation and interest rates, and the risk of renewed geopolitical tensions continue to shape the investment landscape. Hear from Christine Novakovic, Head of Global Wealth Management EMEA, alongside Themis Themistocleous, Head of the Chief Investment Office EMEA, and special guest R.P. Eddy, CEO of Ergo, a leading geopolitical and economic intelligence advisory firm. Together, they...

While the Fed is likely to hold rates steady today, investors should watch for longer-term changes to how it communicates policy and manages its balance sheet. Potential changes may affect rate volatility, long-term yields, and the role of Fed support in bond markets.

Markets are facing renewed pressure from geopolitical escalation, higher oil prices, rising bond yields, and questions over AI investment returns. Investors should focus on portfolio resilience and strategies that can help manage downside risk while preserving long-term upside potential.

While we remain constructive on semiconductors amid solid AI demand, recent market performance highlights the case for broader equity exposure. Strong earnings momentum across sectors and regions points to a wider set of opportunities for investors.

With equity markets near record highs, attention is turning to whether corporate earnings can continue to justify market valuations. As the AI investment cycle evolves and opportunities emerge across global markets, investors are also assessing the outlook for inflation, interest rates, the risk of renewed geopolitical tensions in the Middle East—and what they could mean for markets and portfolios.

US Treasury yields have risen as renewed Middle East tensions and higher oil prices have revived inflation concerns, but we expect yields to move lower over the coming quarters. In our view, current elevated yields offer an opportunity to add quality bonds for income, diversification, and potential capital gains.

Earnings from hyperscalers will be a key test for the AI trade as investors look for greater clarity on capex, revenue durability, and margin resilience. While we remain constructive on AI’s longer-term growth story, a balanced approach across and beyond the AI value chain remains important.

Hostilities in the Middle East are weighing on investor sentiment already weakened by the sell-off in chipmakers over the past week. But we maintain the view that equities have room to move up, supported by robust earnings strength.

Hostilities in the Middle East are weighing on investor sentiment already weakened by the sell-off in chipmakers over the past week. But we maintain the view that equities have room to move up, supported by robust earnings strength.

Global stocks came under pressure this week amid a selloff in chipmakers and escalating tensions in the Middle East. We think strong earnings growth should continue to support global markets, and investors should seek diversified exposure to participate in market upside.

South Korea's equity benchmark has fallen more than 25% since its all-time high in June amid regulatory concerns and investor worries over the durability of the broader semiconductors rally. We retain a constructive view on the industry, but think selectivity is key. Investors should also ensure diversified exposure to AI.

We expect second-quarter earnings to deliver another strong set of results, with all sectors likely to report an increase in profits. Our forecast of 28% earnings growth for the S&P 500 is supported by strong AI investment, improving cyclical activity, and solid consumer spending.

Markets are on edge as renewed US-Iran tensions pushed oil prices and Treasury yields higher. Investors will now look to June CPI data and Fed Chair Kevin Warsh’s congressional testimony for clues on the path of US interest rates. We expect inflation pressures to ease in the coming months, which should ultimately lead to lower bond yields.

Continued US-Iran tensions are testing markets, but there are ways investors can consider helping portfolios navigate uncertainty while staying positioned for potential upside.

The path toward a lasting peace deal between the US and Iran is proving to be bumpy, with President Trump saying further negotiations with Tehran were a "waste of time." The most effective method to navigate near-term volatility remains diversification, in our view. But with a diplomatic solution still likely, we expect global equities to move higher, bond yields to decline, and broad commodities to stay supported.

As investors assess the next phase of the AI growth story, we believe diversifying equity exposure remains key. We expect the next leg of stock gains to be marked by a broadening of market leadership.

As investors assess the next phase of the AI growth story, we believe diversifying equity exposure remains key. We expect the next leg of stock gains to be marked by a broadening of market leadership.

We remain constructive on the AI theme, but the market narrative is gradually shifting from strong near-term growth to the durability of spending beyond 2027. Investors should ensure diversification and selectivity in their exposure.