Trump Administration's First Two Years: An Unanticipated Overview
In a recent analysis, Swiss banking giant UBS has published forecasts for the global economy following Donald Trump's re-election, offering insights that are likely to be covered in the current issue of €uro am Sonntag. The report provides a comprehensive outlook on the global economy, addressing questions about which sectors and regions may benefit and face challenges in the coming years.
European stock markets are expected to see modest near-term returns, with UBS recognising that the STOXX Europe 600 index has reached its 2025 price target of 550 points. However, the bank maintains a neutral stance on Europe currently, but sees potential for upside by 2026, targeting 590 points (around 7% upside). Despite this positive outlook, earnings momentum in Europe remains weak for 2025, with expectations of only about 2% sales growth and 3% earnings growth. The weakened growth is attributed to trade tariffs, currency headwinds (a rising euro against the dollar), and sector-specific challenges especially in autos and luxury goods. Forward earnings growth is expected to turn negative in the short term but may rebound as 2026 growth factors come into play.
In contrast, the US economy is projected to outperform Europe, with UBS forecasting that the US, along with emerging markets, will outperform Europe in the near term. Earnings growth in the US is expected to outpace Europe’s, supported by a more accommodative US Federal Reserve policy and relatively favorable investor sentiment.
Emerging markets are also expected to see strong growth, with UBS favouring markets such as Taiwan, India, and specifically China’s tech sector. The bank's positive outlook on emerging markets includes a focus on mainland China’s technology sector, indicating belief in China’s continued significance and growth potential globally. This is aligned with expectations of strong earnings growth in certain Chinese industries, positioning China as a key player in global equity returns alongside other emerging market hubs.
Although UBS commentary does not specify direct forecasts explicitly linked to Donald Trump’s re-election, the context around US trade policy, tariffs, and fiscal measures suggests ongoing uncertainty but gradual clarification in US trade policies. This could affect European and global markets through tariffs and currency fluctuations. The bank anticipates that uncertainty may cause near-term volatility but gradually stabilize as policies become clearer.
The oil industry, however, is not expected to see a bullish trend, as the global GDP is projected to grow by 2.8% in 2025 and 2.5% in 2026, which is slightly lower than the previous years' growth rates. The Eurozone is expected to lag behind, with only a modest growth of 0.9% in 2026.
In summary, UBS sees modest near-term returns for Europe with a cautious but constructive outlook for 2026; stronger near-term potential and earnings growth for the US and emerging markets, especially in technology sectors including China; and an expectation that US trade policies (potentially influenced by Trump's re-election) will contribute to some volatility but also define clearer market conditions going forward.
- In the report, UBS suggests that individuals who are interested in personal-finance planning should consider investing in the technology sectors of emerging markets, such as Taiwan, India, and China, particularly China's tech sector, given the bank's positive outlook on these markets.
- For those focused on business or finance, the analysis indicates that the US economy is expected to outperform Europe and emerging markets, including China, in the near term, due to factors like a more accommodative US Federal Reserve policy and relatively favorable investor sentiment.
