US stock market faces more challenges in second half of 2023, UBS warns

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UBS analysts warned the U.S. stock market faces a 'lackluster' second half of 2023 amid ongoing risks from chronic inflation and higher interest rates.

Allspring Global Investments Head of Equities Ann Miletti joined ‘Making Money’ to discuss the state of the U.S. markets as investors continue to search for the top stocks.since 1948 at the beginning of June, but the sizable rally that led it there may not last for long, according to UBS.

In an analyst note on Monday, UBS strategists led by CIO Americas Solita Marcelli and CIO Mark Haefele warned the stock market faces a number of risks in the second half of 2023 that could send equities spiraling. "With both global and US stocks more than 20% above their October 2022 lows and a more challenging second-half outlook, we believe investors should position for more lackluster stock market performance through the remainder of the year," the analysts wrote. Stocks have recorded a stellar year so far on enthusiasm around artificial intelligence as well as investor hopes that thecan successfully engineer a soft landing while also taming runaway inflation.

However, the UBS analysts noted that threats to the economy remain, possibly putting equity pricing at odds with "slowing growth and stickier inflation." "We see risks of persistent core inflation to mean U.S. rates could move higher and stay at these levels for longer," they wrote. That could mean the Fed is forced to continue hiking interest rates, even though investors are hoping that the central bank concludes its tightening campaign and begins cutting rates soon.

 

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