According to UBS strategists, led by Gerry Fowler, the S&P 500 is poised for increased volatility throughout 2025, driven by a mix of macroeconomic challenges, policy uncertainties, and geopolitical factors.

Key Takeaways from UBS Analysis

1. End of a Low-Volatility Phase:

   • UBS forecasts that the stable low-volatility environment seen in 2024 will not continue into 2025, with slower nominal growth and anticipated rate cuts sustaining high volatility levels.

2. Economic and Policy Influences:

   • Macroeconomic Uncertainties: Markets continue to face repercussions from disruptions stemming from the COVID-19 era, impacting business cycles and economic growth indicators.
   • Regional Economic Disparities: Anticipated slower growth in the U.S. and China may further widen economic divides, with President Trump’s “America-first” policies likely amplifying these effects.
   • Rate Dynamics and Growth Trends: Historically, combined pressures from slow growth with rate cuts often contribute to volatility and uncertainties in employment markets.

3. Geopolitical Risks:

   • Potential escalations in tariff-related tensions under Trump’s administration could significantly impact market stability. Tariffs could disrupt economic impacts across various sectors, regions, and companies, adding layers of unpredictability.

4. Sector Vulnerabilities:

   • UBS highlights European equities and banks as particularly exposed to volatility alongside policy shifts. In the U.S., uncertainties regarding tariff strategies could have wider implications.

5. Drivers of Volatility:

   • UBS notes that key growth-related reports are expected to trigger intermittent volatility spikes, as markets assess economic recovery trajectories and employment statistics.

Investor Implications

• Market Sensitivity: Economic metrics such as unemployment rates or GDP growth will likely hold significant sway over market movements going forward.
• Strategic Future Adjustments: Investors may wish to diversify portfolios and concentrate on sectors that are less affected by policy or economic shifts as volatility persists.
• Global Interdependence: Fluctuations in tariff policies could create ripple effects, impacting global equity and fixed-income markets.

UBS’s analysis emphasizes the importance of understanding macroeconomic conditions and policy dynamics when navigating 2025 financial markets effectively. Visit resources like the Sector Historical API for deeper insights.