UBS' Alli McCartney: Here's why the bull market remains intact

Market Sentiment and Strategy - The market is currently experiencing low volume, particularly in Europe and the US, ahead of Fed commentary and Nvidia earnings, suggesting caution in interpreting short-term movements [3] - UBS advises a "wait and see" approach for the remainder of August, particularly regarding AI and big tech stocks, which have already seen significant gains [7][8] - The firm is neither aggressively buying nor selling, expressing strong interest in the credit markets [9] - August is considered a seasonally unusual month, and the recent market downturn has not caused undue alarm among clients, who generally feel positive about their portfolio construction [12][13] Interest Rate Expectations - UBS anticipates an 80-90% chance of a 25 basis point rate cut in September [5] - The firm expects a total of 100 basis points of rate cuts between the present and June 2025, with the Fed funds rate potentially landing in the low 3% range [6] - The timing of rate cuts is considered less critical than the overall direction, with the appointment of a new Fed chair potentially acting as a tailwind for markets [6][7] Economic Factors and Consumer Behavior - The labor market will be a key factor in determining future market changes in the third and fourth quarters [5][17] - There is a significant divergence between the high-end and low-end consumer, as well as between goods and services, and staples versus discretionary spending [16] - Credit markets are currently complacent, with investment-grade spreads at a 25-year tight, driven by expectations of future Fed rate cuts [10] AI and Technology - Some argue that there are emerging weaknesses in the AI trade [1] - Clients are increasingly involved in the practical applications of AI, which provides comfort and balances concerns about market volatility [14][15]