UBS strategists, led by Gerry Fowler, project that the S&P 500 will face heightened volatility throughout 2025 due to a combination of macroeconomic challenges, policy uncertainties, and geopolitical tensions.

Key Insights from UBS Analysis

End of a Low-Volatility Era:

UBS believes that the stable, low-volatility environment seen in 2024 is unlikely to persist into 2025. Factors like slower nominal growth and rate cuts are expected to sustain elevated volatility.

Economic and Policy Drivers:

Macroeconomic Uncertainty: Lingering disruptions from the COVID-19 era continue to impact markets, primarily through challenges in business and market cycles.
Regional Disparities: The U.S. and China are expected to experience slower growth, while President Trump’s “America-first” policies may exacerbate regional economic divides.
Rate Cuts and Growth Dynamics: Historically, slower nominal growth paired with rate cuts has fueled uncertainty, particularly concerning unemployment or mid-cycle slowdowns.

Geopolitical Risks:

Potential escalations in tariff tensions under Trump’s administration could significantly influence markets. Tariffs are anticipated to redistribute economic impacts across sectors, regions, and companies, introducing further unpredictability.

Sectoral Impacts:

European equities and banking sectors are highlighted as particularly vulnerable to volatility and policy shifts. In the U.S., uncertainties surrounding tariff implementations could have global repercussions.

Volatility Drivers:

UBS foresees intermittent spikes in volatility triggered by key growth-related data, as the markets gauge the trajectory of economic recovery and employment trends.

Broader Implications for Investors

Market Sensitivity to Data: Economic indicators such as unemployment rates and GDP growth are expected to carry heightened importance, potentially driving sudden market movements.
Strategic Adjustments: Investors may need to prepare for a more volatile environment by diversifying portfolios and focusing on sectors less sensitive to macroeconomic and policy shifts.
Global Interconnections: Tariff-related uncertainty and its redistributive effects could create ripple effects, impacting global equities and fixed-income markets.

UBS’s insights underscore the importance of understanding macroeconomic and policy dynamics when navigating financial markets in 2025. For a detailed look into market trends, you can explore tools like the Sector Historical API for data-backed insights