UBS Sees No Calm in Market Storm on Trump's Odd Decision-Making

(Bloomberg) -- UBS Wealth Management says the storm that hit U.S. equities Monday won't go away anytime soon.

Markets will remain volatile before a payrolls report Friday, kept on edge by the hard-to-guess prospects of what President Donald Trump's government will do next, Mike Ryan, chief investment officer for the Americas in global wealth management, and David Lefkowitz, senior equity strategist for the Americas, wrote in a note to clients. That applies particularly to global trade, they wrote.

U.S. equities tumbled to start the week, led lower by technology stocks, as fresh presidential criticism of Amazon.com Inc. and retaliatory tariffs from China rattled investors. China's changes to its treatment for more than 100 types of U.S. imported goods came after Trump rocked equities last month by announcing levies on imported aluminum and steel.

“The Trump administration's unorthodox and unpredictable decision-making is likely to keep markets on edge, especially as global trade takes center stage in policy discussions,” Ryan and Lefkowitz wrote. “Markets may remain choppy over the next few days as we await Friday's payroll report and the kick-off of first-quarter earnings season next week.”

While the selloff in U.S. equities was due to “a combination of geopolitical and fundamental” reasons, technical factors also exacerbated it, Ryan and Lefkowitz wrote. The S&P 500 Index closed Monday below its average price for the past 200 days for the first time since June 2016.

Tax Cut

Still, UBS Wealth says that beyond the rhetoric over trade, there are reasons to be optimistic. One of them is also due to Trump: the expected positive impact on U.S. companies' earnings from his tax cuts.

“The overall outlook remains supportive of risk assets,” Ryan and Lefkowitz wrote. “With corporate earnings still poised to rise sharply in the aftermath of tax reform, we look for equity markets to continue to grind higher.”

To contact the reporter on this story: Tom Redmond in Tokyo at tredmond3@bloomberg.net.

To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Chris Nagi

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