Equities Rise Despite Political Turmoil: UBS Global Analysis
Equities are on the rise despite recent political turmoil around the globe. The collapse of the French government and political unrest in South Korea and Germany have been making headlines, but investors seem unfazed. In fact, the S&P 500 hit its 56th all-time high this year, and Europe’s STOXX 600 has been climbing steadily over the past five trading days.
While these political events may have caused some uncertainty, the underlying strength of the global economy is providing support to the markets. The US economy, in particular, is showing signs of growth with stable consumer spending and a solid labor market. Federal Reserve Chair Jerome Powell even described the US economy as being in “very good shape.”
Looking ahead, we can expect further interest rate cuts in the US and Eurozone, which should benefit equities. The European Central Bank is expected to cut rates for the fourth time this year, providing a supportive monetary policy backdrop for European stocks.
Adding to the positive outlook is the growing demand for artificial intelligence (AI). Companies like Salesforce and Marvell are seeing strong AI demand, which is expected to sustain the equity bull market. With big tech companies investing heavily in AI, we can anticipate significant earnings growth in the global tech sector in the coming years.
For investors looking to position themselves for further equity gains, focusing on sectors like technology, utilities, and financials in the US could be beneficial. Additionally, Eurozone small- and mid-cap stocks, Swiss high-quality dividend stocks, and diversified exposure to Asia ex-Japan are all areas worth considering.
Overall, despite the political uncertainty, the fundamentals of the market remain strong, and it seems like the current favorable macroeconomic backdrop will continue to support equities as we move into the new year.
