UBS predicts a "no landing" U.S. economy, with economic momentum and artificial intelligence trends driving stock market growth

The Swiss investment bank UBS predicts that the US economy will enter a "soft landing" scenario, which means that economic growth will continue, and inflation will remain stable, contrary to the previous forecast of an economic recession. Due to employment data and GDP growth exceeding expectations, UBS believes that the election may cause market volatility, but the momentum of the economy and the trend of artificial intelligence will drive stock market growth, and it is expected that the Federal Reserve will gradually cut interest rates. UBS predicts a "soft landing" scenario for the US economy In a report, the investment banking giant UBS predicts that the US economy will enter a "soft landing" scenario, with expected sustained economic growth and manageable inflation supporting stock market development. In the report released on Friday, UBS pointed out that the Federal Reserve began a series of rapid interest rate hikes in 2022 to address high inflation and strong economic expansion. This has sparked discussions about whether the Federal Reserve can achieve a "soft landing" or push the economy into a recession. However, UBS believes that there may be a third path, where inflation gradually approaches the Federal Reserve's target, while economic growth exceeds the original expectations. The UBS team emphasized: "The current economic data supports this view. The labor market is more robust than expected, with the latest non-farm employment report exceeding forecasts, pushing the three-month average to a healthy level of 186,000. Revisions to the data over the past five years show that the annual GDP growth rate has been 2.5% since 2019, outperforming the initial expectations. Although industrial production fell 0.3% in September due to factors such as the Boeing strike and hurricanes, retail sales rose 0.4%, reflecting strong household finances and income growth." UBS also pointed out that the inflation trend is approaching the Federal Reserve's target, making rate cuts more feasible. Although monthly inflation data may fluctuate, the overall deflationary trend remains stable. UBS analysts emphasized that the Federal Reserve's preferred inflation indicator, the Personal Consumption Expenditures (PCE) price index, has recently reached its lowest point since February 2021: "We believe inflation will be low enough for the Federal Reserve to continue cutting rates." Looking ahead, UBS expects increased market volatility as the US presidential election approaches, but they do not believe this will disrupt the broader economic growth trend. UBS analysts noted: "We expect increased market volatility before the election, as neither party has a clear advantage in the key swing states that will determine the outcome." However, the analysts also added that the election will take place against the backdrop of the Federal Reserve's interest rate cuts, the momentum of US economic growth, and long-term trends such as artificial intelligence (AI). Therefore, they advise investors not to make impulsive or simplistic stock market assumptions based on individual policies, as the impact of policies needs to be considered in terms of their likelihood of implementation and priority.