There is more upside for both equity and bond markets – UBS
U.S. equities hover near their record highs, while 10-year U.S. Treasuries trade with yields nearly 100 basis points below their October peaks. UBS economists delve into the market outlook, assessing the potential for continued growth in both equity and bond markets in 2024.
In our central scenario, we anticipate a soft landing. Modest further gains for equities are expected, supported by lower interest rates, positive albeit decelerating economic growth, and a rise in corporate earnings.
Our analysis suggests that long-term bond yields have room to decline further. This is driven by the observation that long-term real rates remain higher than the Federal Reserve’s estimate of the real neutral rate. Consequently, we express a preference for bonds on a risk-adjusted basis in this market environment.