UBS Lowers Recession Probability Amid Economic Uncertainty
UBS economists, led by Pierre Lafourcade, have just lowered the Swiss bank’s estimated recession probability from 60% to 53%. This reduction marks a significant shift from the 75% probability estimated just a year ago. While other investment banks are raising their recession forecasts, UBS is more optimistic about the economic outlook.
Recent data, including the July jobs report, has been mixed. The U.S. economy added just 118,000 jobs, leading to a rise in unemployment to 4.3%, the highest level in years. Despite these challenges, UBS believes that the probability of a recession has decreased in recent months.
In contrast, both Goldman Sachs and JPMorgan have raised their recession probabilities in light of the latest economic data. JPMorgan now estimates a 35% chance of a recession before 2024 ends, while Goldman Sachs puts the probability at 25%. The uncertainty in the market is further compounded by the unwinding of the Japanese yen carry trade, which could lead to increased stock market volatility.
The Federal Reserve is expected to lower interest rates at its upcoming September policy meeting to stimulate economic growth and combat rising unemployment. This move could provide a much-needed boost to the economy and alleviate concerns about a potential recession.
In conclusion, while the economic outlook remains uncertain, UBS’s decision to lower the recession probability offers a glimmer of hope in an otherwise challenging environment. Investors should closely monitor the latest economic indicators and adapt their investment strategies accordingly to navigate the current market conditions.