I came across this interesting piece by Mark Haefele of UBS. You do not have to agree with everything he says, but it is a worthwhile read for anyone trying to make sense of what might come next this year, crystal ball not required.
Mark is certainly one of the smartest guys out there, even if his views occasionally spark a few eyebrow raises. He is one of the few people I actually follow on LinkedIn.
Here is a section:
We see five key factors that we expect to drive investment outcomes in the months ahead:
First, US trade and fiscal policies are gradually taking shape. While the expiration of the US “reciprocal” tariff pause and legal debates around the basis for tariffs risk near-term volatility, we expect the final contours of US trade policy to become clearer in the weeks ahead.
Meanwhile, Treasury and legislative actions, including the likely passage of the One Big Beautiful Bill Act, should provide greater clarity on fiscal policy. Elevated tariffs and persistent deficits may periodically unsettle markets, but we do not expect them to end the broader economic expansion or trigger a sustained market drawdown.
Second, geopolitical risk remains a feature of the current environment. Ongoing conflicts in the Middle East and Eastern Europe pose tail risks. The challenge for investors is how to effectively diversify and hedge the risk of further escalation.
Third, we expect interest rates and bond yields to fall. The Federal Reserve has been on hold in the first half of the year, but we expect it to resume cutting in the second half. We believe lower rates, lower growth, slower inflation, and “safe-haven” flows will lead to lower high grade bond yields by year-end.
Fourth, we expect further US dollar weakness. After a significant decline in the first half, the pace of further depreciation may moderate, but we expect the longer-term trend of “de-dollarization” to persist.
Finally, we believe structural growth trends, particularly artificial intelligence, power and resources, and longevity will continue to drive equity market returns, supported by further innovation, adoption, and monetization in the second half and beyond.