Markets and life are full of conundrums. This week, our Viewpoints podcast addresses at least three current ones. Some of them have unexpected resolutions, related to the surprising roles and impact of cheating, free-riding, bond-yields, the sometimes-infectious nature of mood-swings and time’s canny ability to heal many wounds.

We get fresh evidence on the hedonism of the US consumer, with personal income and spending numbers. The personal consumer expenditure deflator will be the markets’ focus. This is less influenced by the nonsense of owners’ equivalent rent than is consumer price data. There are other notable differences (like motor insurance). Overall, the inflation data is expected to stay steady.

Yesterday equities were a little upset because bonds were a little upset because of weaker demand at a US bond auction. Should investors be upset? This is not a US version of the UK’s Truss debacle. Markets are not disorderly and government policies are not destabilizing. The absolute level of debt is not a concern—many countries (including the US) have had and do have higher debt ratios. The political polarization that prevents a policy for a sustainable deficit is a concern, but is probably more a background worry for now.

We explore the behavior of action bias, including a look at when it might and might not makes sense for one to adjust their investment approach, along with strategies to consider that can protect against the behavior of action bias. Featured are Justin Waring, Senior Total Wealth Strategist, and Katie Williams, Discovery Strategist, from the UBS Chief Investment Office, along with Mark Halloran, Head of Business Development for Individual Markets with Transamerica. Host: Daniel Cassidy

The entertainment from the US Dallas Fed manufacturing survey comments did not disappoint. Several would be met with a disparaging “OK, boomer” if only the TikTok generation read the Dallas Fed manufacturing survey. Today’s anecdotes come in the form of the Federal Reserve’s Beige Book. These comments are indirect quotes, and sanitization reduces entertainment value. Remarks on prices and pricing power are still likely to be investors’ focus.

Chief Investment Officer Mark Haefele and colleagues from around the world discuss the state of play in global markets and recommendations for investors.

Today we spotlight the May edition of the monthly Sustainable Investing Perspectives publication. Among the topics featured within, Amantia highlights global plastic reduction efforts, including the role companies are playing, along with the potential investment considerations from these efforts that investors should be mindful of. Featured is Amantia Muhedini, Sustainable & Impact Investing Strategist Americas, UBS Chief Investment Office. Host: Daniel Cassidy

The UK’s May shop price index showed ongoing non-food deflation, and a slower pace of food price increases as the profit-led inflation episode wanes. Supermarkets’ dual pricing structure (offering preferential discounts to loyalty card holders) seems to be ending. Shop price data includes the discounts, consumer price data does not—and the gap between the two has disappeared.

ECB Chief Economist Lane stated the central bank is ready to cut rates. We have heard this from other ECB governing council members, but Lane’s remarks come with the added authority and insight that only a chief economist can bring. Europe has (on a like-for-like basis) the same inflation as the US or the UK, and the ECB is not known for the speed of its decision-making. That the ECB looks to be first to cut rates may be due to the narrative around European growth, rather than the substance of economic data.

Solita Marcelli, CIO Americas of UBS, along with Jeffery Gundlach CEO of DoubleLine, share valuable insights and perspectives on the current investment landscape.

Japan’s April consumer price inflation was a little dull—the inflation rate slowed more or less as expected, as food prices offered disinflation. Some sources of inflation are probably not domestic in origin—although the rate has moderated, hotel price inflation remains close to 20% y/y. Very strong foreign tourist numbers helped push up those prices.

US President Clinton’s admonition “It’s the economy, stupid” puts economists in their proper (superior) place. But which economy? Economists get excited about inflation, but voters think in terms of price levels—a higher price level can be considered unfair even as inflation falls. GDP is too abstract for voters, who do not care whether “growth” is -0.1% or +0.1%. Economic perceptions (honest perceptions, not sentiment surveys) drive politics.

With US equity indices having recently reached record levels, many investors are wondering how long this momentum can continue (and what might disrupt it). Burkhard outlines CIO’s view on equity returns, along with breaks down the anatomy of a bull market. Plus, we spend time on the implications of the bull market wealth effect to consumer behavior and economic activity.

European Central Bank President Lagarde did, after all, offer policy comments yesterday—in an Irish TV interview. Lagarde signaled a June Euro area rate cut is coming, because inflation is under control. Markets already expect this. Currently, US inflation is the same as that of Europe when measured on a like-for-like basis, so why is the Federal Reserve delaying rate cuts?

Join the CIO fixed income team every other month for a discussion around the drivers behind asset class trends and performance, rates, positioning, and a near-term outlook. Leslie Falconio, Head of Taxable Fixed Income Strategy Americas, moderates a panel which includes insights from Senior Fixed Income Strategists Barry McAlinden, and Frank Sileo, along with Senior Closed-end Funds Strategist, Sangeeta Marfatia, and Senior Municipal Strategist, Kathleen McNamara.

US Treasury Secretary Yellen receives an honorary doctorate today, which gives ECB President Lagarde an opportunity to speak in public. It would be poor taste to talk of policy on such an occasion. Of more interest is Yellen’s motive for visiting Europe—the G7 finance ministers’ meeting on Thursday. This may discuss using the income from frozen Russian assets (including central bank assets) to aid Ukraine. Markets may pay attention not just to the implications for Ukraine, but the implications around the security of asset ownership in a politically polarized world.

With US equity markets having reached all-time record closes, Jason weighs the ‘sell in May, and go away’ narrative, and discusses how investors should consider positioning in light of current market levels. We also reflect on the latest round of inflation data, as well as near-term market drivers. Featured is Jason Draho, Head of Asset Allocation Americas, UBS Chief Investment Office. Host: Daniel Cassidy

Iranian President Raisi has been killed in a helicopter crash. The first vice president becomes interim president, and elections will be called within 50 days. No change is expected in Iran’s main policy positions as major policy decisions are overseen by Supreme Leader Khamenei. Over the longer term, market considerations will focus on the implications for Khamenei’s successor, and the potential for protests around the elections.

We preview the current calendar for US Presidential debates, unpack the FAA Bill and the implications for consumers, and share takeaways from Secretary of State Blinken’s recent visit to Ukraine. Featured is Shane Lieberman, Senior Governmental Affairs Advisor, Governmental Affairs US. Host: Daniel Cassidy

China reported stronger industrial production and weaker domestic retail sales. If these figures are accurate, they present some risks to China’s policy-makers. Production strength seemed focused in politically-sensitive areas, including computing and autos.

Join members of the UBS Chief Investment Office for some timely thoughts and reflections around the April Consumer Price Index (CPI) print, and what this latest inflation data might mean for monetary policy, and the markets. Featured are Brian Rose, Senior Economist Americas, Leslie Falconio, Head of Taxable Fixed Income Strategy Americas, and David Lefkowitz, Head of Equities Americas. Host: Daniel Cassidy

Yesterday’s US consumer price data was less weird—no 4% monthly increases in rent in Detroit (as in March). The detail showed for almost every business sector, there is deflation somewhere in the United States. For the benefit of non-economists (like the Chair of the Federal Reserve) this is not remotely consistent with sticky prices.

Following a brief Springtime hiatus, we catch-up with Burkhard to hear about his recent travels and the connections that can be drawn from the picturesque landscapes of Europe to the European economic landscape. Burkhard also shares takeaways from a recent conversation with IMF-Head Kristina Georgieva, where they discuss the ingredients for a successful economy (tune in to find out!).

Federal Reserve Chair Powell wants further inflation declines before the Fed cuts rates. US inflation is already at or near target for the prices over which the Fed has control. Last month’s consumer price inflation did surprise to the upside, mainly because of rents in the city of Detroit.

We catch-up with Leslie Falconio to discuss how a shift in the Fed’s course for monetary policy has impacted fixed income assets, along with review CIO’s expectations for rate cuts in 2024, along with current positioning recommendations within fixed income. Featured is Leslie Falconio, Head of Taxable Fixed Income Strategy Americas, UBS Chief Investment Office. Host: Daniel Cassidy

Following a sharp rebound in Chinese equities, Xingchen weighs in as to how investors should treat their Chinese equity exposure, along with cites some near-term market catalysts that investors should be mindful of. Featured is Xingchen Yu, Emerging Markets Strategist, UBS Chief Investment Office. Host: Daniel Cassidy

Germany and Spain are offering final consumer price inflation data for April today. Although a lot of data is Europe is revised, the initial estimates for consumer prices are rarely altered. The narrative is of Eurozone inflation within a reasonable range of the ECB’s target, and evident disinflation pressures.

Join us for a fireside chat that Mark Axelowitz, Managing Director and UBS Private Wealth Advisor and Solita Marcelli, Chief Investment Officer for CIO Americas, hosted with Bill Ackman, Founder and CEO of Pershing Square Capital Management, and Ryan Israel, Chief Investment Officer at Pershing Square Capital Management.

We take inventory of recent market performance and drivers, along with consider the prospects for downside in the markets if certain near-term macro and micro factors disappoint investor expectations - including this week’s key April inflation prints. Featured is Jason Draho, Head of Asset Allocation Americas, UBS Chief Investment Office. Host: Daniel Cassidy

On this episode of 3-Levels, Justin and Ainsley explain the differences between traditional accounts and Roth accounts, including considerations when it comes to contributions, frequency of account reviews, and taxes. Featured are Justin Waring, Senior Total Wealth Strategist, and Ainsley Carbone, Retirement Strategist, from the UBS Chief Investment Office. Host: Daniel Cassidy

More details are emerging about US President Biden’s imminent US consumer tax increases. Some of the tax changes are sizable, with suggestions that consumers of electric vehicles from China could be set at over 100%. Steel and aluminum consumers will also pay more to the US Treasury. However, the economic impact is likely to be muted. US President Trump’s taxes on intermediate goods generally squeezed US corporate profits more than they raised consumer prices, and the US is not a big consumer of electric vehicles from China.

Following a pause of arms shipments to Israel from the US, Shane outlines what the response has consisted of and what might come next. We also cover this week’s efforts to remove House Speaker Mike Johnson from his post, along with the testimonies on Capitol Hill surrounding antisemitism across US school campuses. Featured is Shane Lieberman, Senior Governmental Affairs Advisors, Governmental Affairs US. Host: Daniel Cassidy

We revisit our conversation on the emerging markets and outline CIO’s current thinking when it comes to equity and fixed income positioning within the broader asset class. We also explore risk factors, spanning inflation to geopolitical concerns. Featured is Chi Amaechi, Emerging Markets Strategist, UBS Chief Investment Office. Host: Daniel Cassidy

Media reports suggest US President Biden plans to announce new taxes on US consumers of products from China, specifically, electric vehicles and solar products. These taxes are not as broad as the consumer taxes imposed by US President Trump, but they are reflective of the trends of scapegoat economics and prejudice politics. Economic nationalism is a specific manifestation of those trends.

Sweden’s Riksbank followed the Swiss National Bank’s leadership with an interest rate cut. The move was generally though not universally expected by financial markets. The press conference implied that lower inflation was driving interest rates lower, and that more rate cuts may be forthcoming later this year.

Hear the latest thinking and investment recommendations from the UBS Chief Investment Office with Dan Scansaroli, Head of Portfolio Strategy & UBS Wealth Way Americas, and Nadia Lovell, Senior Equity Strategist Americas.

Sweden’s Riksbank is expected to cut interest rates at its meeting today (this is a widespread but not a universal expectation). Swedish inflation is some way above 2%, but the trend has been for slower price increase. In cutting rates, the Riksbank would simply be following inflation lower (as with the earlier Swiss rate cut).

Eric rejoins the podcast to share his take on how current economic conditions and the rate environment have impacted consumer behavior and spending patterns. We also touch on how brands have been adapting or pivoting in order to maintain consumer engagement. Featured is Eric Clark, Portfolio Manager with Accuvest Global Advisors. Host: Daniel Cassidy

In the Middle East, Hamas accepted a Qatari/Egyptian proposal for a ceasefire, but the Israeli government has rejected it. There are obvious humanitarian consequences from this, but little direct market impact. Over the longer term, there may be some wider political considerations as this is a polarizing issue in the US (and Republican and Democratic party conventions loom in July and August).

As we turn the page on a volatile month of April and look ahead to the summer, we consider whether the April FOMC meeting and Employment Report outcomes have hinted at the return of a ‘goldilocks’ environment? Jason explains, along with outlines positioning considerations for the current environment. Featured is Jason Draho, Head of Asset Allocation Americas, UBS Chief Investment Office. Host: Daniel Cassidy

A single, dubious quality US data report last Friday was enough to send bond and equity markets into paroxysms of delight. One month’s employment report should not trigger market moves of this degree. It is easy to put all the blame for this on the exuberance of traders, but Federal Reserve Chair Powell’s mantra of “data dependency” means investors will naturally elevate imprecise short-term data releases into the arbiters of US monetary policy.

We recap the week that was, including today’s release of the April employment report, Wednesday’s Fed statement and press conference, along with preview what you can expect in the week ahead. Featured is Brian Rose, Senior Economist Americas, UBS Chief Investment Office. Host: Shiavon Chatman

Our conversation covers recent developments and potential executive action surrounding the US-Mexico border, Secretary of State Blinken’s Middle East regional tour, and a motion to vacate House Speaker Mike Johnson. Featured is Shane Lieberman, Senior Governmental Affairs Advisor, Governmental Affairs US. Host: Daniel Cassidy

US employment report Friday looms. Around 119,000 companies will be asked about their employees. Around 67,000 companies will not bother to reply. Markets will obsess about the data anyway. The expectation is for slower job creation (as measured by payrolls), with a stable monthly change in average earnings (which are not the same thing as wages).

Our series of emerging markets conversations continues as we expand on CIO’s view on emerging market debt, along with risks and positioning considerations to be mindful of. Featured is Donald McLauchlan, Emerging Markets Strategist Americas, UBS Chief Investment Office. Host: Daniel Cassidy

Chief Investment Officer, Mark Haefele, and colleagues around the world discuss inflation expectations, the outlook and implications of the situation in the Middle East, and scenarios for investors.

The Federal Reserve announced a slower pace of shrinking its balance sheet. Context is important here—quantitative policy is about the balance between the supply of and demand for liquidity. Demand for liquidity was slowing significantly after the pandemic, requiring the Fed to shrink its balance sheet to match. Liquidity demand is now slowing less, so the Fed’s balance sheet can shrink more slowly.

A large part of the world is not working today, in celebration of workers. But the old order is changing—and increasingly we may need to celebrate profits. One of the features of the pandemic was an explosion in small business creation. More people have side hustles: Selling on eBay; renting on AirBnB; writing economic books that are widely available for purchase. Self-employment and contract work have increased. The income from these endeavours is often classified as profits.