Global Risk Radar

Discover the latest UBS Global Risk Radar.

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Geopolitical Uncertainty ahead

Market scenarios for the Year Ahead, While tariffs are likely to dominate headlines and have a significant impact on the market narrative in the months ahead, they are not the only factor likely to drive markets over the next year. The underlying economic and earnings backdrop is also likely to play an important role in shaping the ultimate impact of tariffs. Currently, the backdrop is benign. As we enter the new year, the US economy is in good health, with strong income growth and falling inflation supporting consumer spending. We believe the Fed’s rate-cutting trajectory will continue. And robust AI spending has supported US markets and corporate earnings.

Risk map – Explore our scenario probabilities

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Base case

US equities rise. US growth is supported by deregulation and improved business confidence, more than offsetting the impact of selective tariffs on Chinese and key European imports. Trade and geopolitical negotiations add to volatility for European and Chinese markets. The most expansionary US fiscal plans are shelved and inflation falls toward target. Bond yields fall slightly and central banks consistently cut interest rates toward neutral.

Upside

Downside

Tariff schock

The imposition of large, blanket tariffs on US imports from multiple countries and retaliation from trading partners trigger higher US inflation, which, alongside a rising fiscal deficit, leads to higher bond yields. The disruption to global trade leads to lower US domestic demand and much weaker global economic growth. US and global equities decline.

Hard landing

US growth declines owing to weak consumer spending and deteriorating labor markets. Tariffs add to economic challenges for Europe and Asia. A weaker consumer more than offsets the inflationary impact of tariffs, and inflation falls, prompting central banks to cut rates. Global equities suffer double-digit losses, and credit spreads widen. Assets with safe-haven characteristics, including high-quality bonds, gold, the Swiss franc, and the yen, appreciate.