Policy Puts vs. Errors

UBS analyzes how rising Treasury yields and inflation are testing equities, focusing on the roles of the new Fed chair and potential geopolitical 'puts' in stabilizing markets.

Key Takeaways

• 1.The recent surge in US Treasury yields (18-25bps) reflects rising inflation concerns and fiscal risks, testing market resilience.
• 2.The new Fed chair, Kevin Warsh, faces immediate market testing; a 'Warsh put' involves maintaining inflation-fighting credibility to prevent a steeper rate rise.
• 3.Strong economic fundamentals, including 2% 1Q GDP growth and robust AI capex, support a reflationary outlook rather than stagflation.

Table of Contents

• Policy "puts" vs. errors
• Global asset class preferences definitions
• Appendix
• Risk information
• Generic investment research – Risk information

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