UBS Global Research has identified seven significant macroeconomic themes currently influencing financial markets. These trends include regional shifts, monetary policy developments, and rising geopolitical risks.

1. European Market Outperformance vs. U.S.

European markets have shown stronger performance compared to U.S. equities in early 2025, supported by:

• Strong technical indications.
• Political stability in France.
• Favorable German election outcomes.

However, UBS analysts caution of potential exhaustion as individual stock valuations might face resistance.

2. Credit Market Trends

UBS warns of widening spreads in credit markets:

• Investment-grade (IG) credit: Current spreads at 91 basis points.
• High-yield (HY) credit: Current spreads at 284 basis points.

3. ECB Rate Cuts on the Horizon

• UBS anticipates a 25 basis point rate cut by the European Central Bank (ECB) in March.
• Further easing may follow if macroeconomic conditions deteriorate.

Investor Takeaway

With European market conditions shifting and potential ECB rate cuts, staying informed will be crucial for identifying risks and opportunities in the market.