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

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Moreover, UBS expects a third and a half of the countries it covers to suffer from a recession, cutting global growth next year to 2%, Baweja said. If other nations are struggling, that could hurt spending and investment by foreigners in the US, and demand for American exports.

“We don’t have the necessary conditions for a deep recession, but we have the conditions where global growth is going to be very weak,” Baweja said.

“It’s an inch deep but it’s a mile wide,” he added about the looming downturn. “That is not priced into stocks.”

Baweja isn’t bullish on stocks now that safer assets such as bonds are offering bigger yields, but he expects US equities to outperform their European peers in 2023.

“We’re looking for pretty ordinary returns in equities, full stop,” he said. “If the bulk of the problems next year are going to be in earnings, then Europe is more in harm’s way than the US.”