Investing.com -- Equity markets are rebounding as investors bet on support from both the Federal Reserve and the Trump administration, UBS said in a note Friday.
The S&P 500 rose 2% while the Nasdaq gained 2.7% on Thursday, driven by optimism around potential rate cuts and easing trade tensions.
“Markets are now factoring in both a Trump and a Fed ‘put,’” UBS wrote, referring to the belief that both policymakers and the White House will act to cushion economic or market downturns.
Rate cut expectations rose after Cleveland Fed President Beth Hammack said the central bank could lower rates in June if data weakens, though she added that “patience will be essential.”
Fed Governor Christopher Waller also indicated he would support cuts if tariffs threaten jobs.
UBS expects the Fed to lower interest rates by 75 to 100 basis points this year, although near-term flexibility may be limited.
“The Fed’s policy flexibility appears to be more limited, as it has to balance growth concerns against the risk of a resurgence in inflation,” UBS said.
On trade, President Trump’s less confrontational tone has supported sentiment, even as China’s Ministry of Commerce noted that no formal talks are underway.
UBS believes the administration’s tariff posture reflects sensitivity to market pressure, saying it “points to the existence of a ‘Trump put’ in some form.”
While uncertainty remains, UBS highlighted corporate resilience. Around 70% of S&P 500 companies have beaten first-quarter earnings expectations, and Alphabet’s (NASDAQ:GOOGL) strong results underscored “investing in innovation.” UBS forecasts global tech earnings to grow in the mid-teens this year, despite tariff-related earnings per share cuts of 3% to 5%.
“While tariffs will be a near-term overhang,” UBS said, long-term drivers—particularly artificial intelligence—remain robust, with global AI capex expected to grow 60% in 2025 to $360 billion.