UBS expects gradual Strait of Hormuz recovery and steady Fed rates to sustain equity gains amid strong corporate earnings.
UBS highlights broad-based profit beats across the US, Europe, and Asia as a key driver for equities, outweighing geopolitical tensions in the Strait of Hormuz. The bank anticipates energy flows through the strait will normalize gradually, supporting Brent prices without a return to wartime highs.
The firm expects the Federal Reserve to hold interest rates unchanged for the remainder of the year, contingent on disinflation data aligning with projections. This outlook could bolster risk appetite, particularly if markets reduce expectations for further rate hikes.
Investor sentiment improved in early August following signals of potential talks with Iran, easing immediate concerns over supply disruptions. UBS maintains a constructive view on equities, citing robust earnings growth and cooling inflation as supportive factors.