SoFi CEO enters prepaid forward contract on 1.5 million shares
UBS noted that both bond and equity markets are adjusting to the growing likelihood of tariff increases and their potential economic impact.
Since the intensification of tariff discussions in January, U.S. 10-year real yields have decreased by 30 to 50 basis points, while 2-year inflation expectations have risen by 70 basis points. These movements suggest that markets are factoring in at least half of the anticipated economic effects of tariffs.
In the United States, tariff-sensitive stocks have lagged behind the broader market by 17%, a contrast to Europe’s 9% underperformance in similar sectors. Sales and earnings growth forecasts in the U.S. are being revised downwards, especially in industries vulnerable to tariffs, such as Consumer Durables, Autos, and Retail. Meanwhile, European analyst expectations have remained stable, with no significant downgrade trends observed in comparable sectors.
UBS projects that, given the U.S. market’s earlier tariff pricing, stagflationary pressures will continue, potentially leading to a modest decline in U.S. equities (S&P 500 -3%) and outperformance of hard assets like Gold Miners and Energy stocks compared to others, such as Financials.
For Europe, UBS believes market pricing does not fully reflect the potential impact of tariffs, although the effects will largely depend on price sensitivity, especially in sectors with less competition or high-end consumers. As earnings expectations may be further revised down, tariff-sensitive stocks could face an additional 10% drop.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.