May 2025 | Chief Investment Office GWM | Investment research 1637843_1088be15-4aa8-4910-b027-b2006657e0db.pdf 2 UBS House View | May 2025
Managing exceptionalism
May 2025 | Chief Investment Office GWM | Investment research 1637843_1088be15-4aa8-4910-b027-b2006657e0db.pdf 2 UBS House View | May 2025
In this report
04 Monthly Letter 14 Messages in Focus 16 Asset allocation implementation 18 US economic outlook 20 Equities 21 US equities 22 Bonds 24 Commodities and listed real estate 25 Foreign exchange May
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Publisher
UBS Financial Services Inc.
CIO Global Wealth Management
1285 Avenue of the Americas 8th Floor
This report was published
on 25 April 2025
Solita Marcelli
Authors (in alphabetical order)
This report has been prepared by UBS AG, UBS Switzerland AG, UBS AG
Singapore Branch, and UBS Financial Services Inc. Please see important disclaimers and disclosures at the end of this document. 1637843_1088be15-4aa8-4910-b027-b2006657e0db.pdf May 2025 | UBS House View 3
Dear reader
President Trump’s “Liberation Day” tariffs were harsher than expected, with broad measures that unsettled markets, weighed on sentiment, and brought US exceptionalism into question. How- ever, not all recent news has been negative, as the administration has signaled a willingness to adjust its approach if financial condi- tions deteriorate.
In our view, the US economy is likely to experience a slowdown in
the second half of 2025, driven by weaker consumer confidence, the negative impact of tariffs—especially on Chinese goods—and other policy changes that will weigh on activity in the near term. Our base case calls for 1.5% US GDP growth on average in 2025, but risks are clearly skewed to the downside.
Still, we believe there are also shock absorbers in place that could
help mitigate the risk of a more severe downturn. Notably, the labor market still looks solid, with payrolls growing by 456,000 in 1Q25, more job openings than unemployed workers, and wages rising. While we expect increased layoffs and slower payroll growth in the months ahead, the Fed is signaling its willingness to cut rates in response, even if tariffs push up inflation further above its 2% target in the near term. Additionally, progress in trade negotiations and a more market-sensitive approach from the administration should continue to support sentiment in the near term. President Trump’s recent pause on certain tariff implementa- tion signals that we may have reached peak policy uncertainty, which could be positive for stocks.
Against this backdrop, we recently upgraded US equities to Attrac-
tive. Although volatility is likely to persist, we expect the S&P 500 to rise to 5,800 by year-end, supported by selective trade carveo- uts, central bank rate cuts, and progress on a US budget reconcilia- tion bill. Specifically, we have an Attractive view on information technology, communication services, health care, and utilities.
