UBS analysts have expressed concerns that a further decline of 5-10% in the S&P 500 may trigger a “Fed put,” prompting the Federal Reserve to implement monetary easing measures. Their recent analysis outlines how new U.S. tariffs, now at record levels, dramatically worsen the economic outlook.

Key Insights from UBS Analysis

• Tariff Increases: Recent tariffs announced by the White House could push the ultimate trade-weighted tariff rate to around 23%.
• Stagflation Risks: The new tariffs might drive up production costs, resulting in rising inflation and stalling economic growth.
• Potential Recession: A drop in equity markets might lead to necessary Fed interventions, further influencing market dynamics.
• Global Trade Dynamics: Tariffs induce a risk-off environment, which could hinder global economic activity.

UBS emphasizes that the future hinges on tariff negotiations, potential Fed monetary easing, and fiscal support measures, all of which require careful observation by investors.