STOCKS | UBS Strategist Warns of U.S. Consumer Spending Slowdown Impact on Stocks

UBS Chief Strategist Banu Baweja has expressed concerns over the potential slowdown in U.S. consumer spending due to stagnant disposable income growth and diminishing fiscal support. According to Jin10, Baweja highlighted that despite strong corporate earnings in the first quarter driven by artificial intelligence, the recent surge in long-term U.S. Treasury yields poses a threat to the stock market. The 30-year Treasury yield has reached levels not seen since 2007, reflecting robust nominal growth rather than inflation fears, with real yields being the primary driver of rising rates. Baweja noted that the market's current focus on capital expenditure by large-scale AI enterprises overlooks the risks of slowing consumer and financial sectors. While these sectors showed strong earnings growth in the first quarter, underlying weaknesses remain. He cautioned that if the market is concerned about inflation today, it should worry about growth tomorrow. In this context, Baweja forecasts that large-cap stocks will outperform small-cap stocks, and growth stocks will surpass value stocks, especially if Middle East conflicts persist. Despite challenges faced by both U.S. and European stock markets, Baweja believes the U.S. market will perform better than its European counterpart.