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UBS’s Take on the World Economy

In a recent conference call with clients, UBS’s chief economist and head of asset allocation, said that their targets for growth in the global economy have been revised downward.  UBS is now expecting 3.6% growth in 2008 and 3.8% growth in 2009.  Specifically, the U.S. is projected to grow at only 0.8% this year down from a standing estimate of 2.1%, while growth in Asia is expected to grow at 7.8% and growth in euro-based countries should grow 1.3%.
 
The dollar is expected to remain weak against emerging currencies, with the euro peaking at around $1.50 and giving up some gains to about $1.40 in the back half of this year.
 
Financials kicked off the current market volatility in the U.S. and elsewhere, and while there have been some significant write-downs thus far, UBS believes that a second and third leg of write-downs are still to come, possibly from credit card issuers and for corporate bonds.
 
What does this mean for global stock markets?  UBS currently likes U.S. equities, especially relative to European equities, believing that expanding profit margins will be one catalyst for enhanced market valuations.

 

Laurie Berman, Senior Vice President, lberman@pondel.com