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UBS CEO Ermotti says it is too early to talk about a U.S. recession

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5 months ago

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Sergio Ermotti, chief executive officer of UBS Group

Stefan Wermuth | Bloomberg | Getty Images

ZURICH, Switzerland ꟷ UBS CEO Sergio Ermotti said Wednesday that market volatility could intensify in the second half of the year, but he does not believe the U.S. is heading into a recession.

Global equities saw sharp sell-offs last week as investors digested weak economic data out of the U.S. which raised fears about an economic downturn in the world’s largest economy. It also raised questions about whether the Federal Reserve needed to be less hawkish with its monetary policy stance. The central bank kept rates on hold in late July at a 23-year high.

When asked about the outlook for the U.S. economy, Ermotti said: “Not necessarily a recession, but definitely a slowdown is possible.”

“The macroeconomic indicators are not clear enough to talk about recessions, and actually, it’s probably premature. What we know is that the Fed has enough capacity to step in and support that, although it’s going to take time, whatever they do to be then transmitted into the economy,” the CEO told CNBC on Wednesday after the bank reported its second-quarter results.

UBS expects that the Federal Reserve will cut rates by at least 50 basis points this year. At the moment, traders are split between a 50 and a 25 basis point cut at the Fed’s next meeting in September, according to LSEG data.

Speaking to CNBC, Ermotti said that we are likely to see higher market volatility in the second half of the year, partially because of the U.S. election in November.

“That’s one factor, but also, if I look at the overall geopolitical picture, if I look at the macroeconomic picture, what we saw in the last couple of weeks in terms of volatility, which, in my point of view, is a clear sign of the fragility of some elements of the system, … one should expect definitely a higher degree of volatility,” he said.

Another uncertainty going forward is monetary policy and whether central banks will have to cut rates more aggressively to combat a slowdown in the economy. In Switzerland, where UBS is headquartered, the central bank has cut rates twice this year. The European Central Bank and the Bank of England have both announced one cut so far.

“Knowing the events which are the unknowns on the horizon like the U.S. presidential election, we became complacent with a very low volatility, now we are shifting to a more normal regime,” Bruno Verstraete, founder of Lakefield Wealth Management told CNBC Wednesday.

“In the context of UBS, [more volatility is] not necessarily a bad thing, because more volatility means more trading income,” he added.

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Ken Griffin’s flagship hedge fund at Citadel climbs 15.1% in 2024

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January 2, 2025

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Ken Griffin, founder and CEO of Citadel, speaks during The New York Times’ annual DealBook Summit in New York City, Dec. 4, 2024.

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Billionaire investor Ken Griffin’s handful of hedge funds at Citadel all posted double-digit returns in 2024, led by its tactical trading strategy.

Citadel’s multistrategy Wellington fund, its largest, finished the year up 15.1%, according to a person familiar with the returns. All five strategies used in the flagship fund — commodities, equities, fixed income, credit and quantitative — were positive for the year, the person said.

The Miami-based firm’s tactical trading fund was the standout performer with a 22.3% return for 2024, the person said. Citadel’s equity fund returned roughly 18%, while its global fixed income strategy gained 9.7% last year.

Citadel declined to comment. The hedge fund giant had $66 billion in assets under management as of December.

The stock market just closed out a banner year with the S&P 500 surging 23.3%, building on a gain of 24.2% in 2023. The two-year gain of 53% is the best since the nearly 66% rally in 1997 and 1998.

Griffin recently criticized the steep tariffs President-elect Donald Trump has vowed to implement, saying crony capitalism could be a consequence.

The CEO also said he’s not focused on taking Citadel Securities public in the foreseeable future. The securities firm is a Miami-based market maker founded by the 56-year-old Florida native in 2002.

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