Stock will Decline, Inflation Will Slow, and US Will Dip Into Recession, Says UBS Chief Strategist

Bull - Market Indicator
Bull - Market Indicator

Stocks will plunge, inflation will slow, and the US economy will dip into a recession, the chief strategist of UBS Investment Bank told CNBC on Wednesday.

“I don’t think the lows are in,” Bhanu Baweja said about the US stock market. The benchmark S&P 500 has tumbled 16% to about 4,000 points this year, while the tech-heavy Nasdaq index has plunged 29% to around 11,300 points.

However, the veteran analyst suggested stocks could soar in the short run. He predicts the core Consumer Price Index — which excludes food and energy prices — will add less than 0.3% this month. That could lead investors to lower their expectations of how high and for how long the Federal Reserve will raise interest rates, sparking a scramble to buy equities, he said.

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“The market’s looking for a very restrictive Fed for a very long time,” Baweja said. “I think that will come down a little bit more with the next few CPI prints.”

Still, the top UBS strategist warned that American firms could see their profits slump as the country dips into a recession. Stocks are often valued on a price-to-earnings basis, meaning they’re likely to decline if there’s a broad drop in earnings.