UBS highlights economic fundamentals for markets, urging investors to focus on long-term strategies and diversification
by VT Markets
/
Aug 7, 2025
UBS advises investors to expect short-term market ups and downs while sticking to long-term investment strategies. They recommend diversifying across various asset classes, using capital preservation methods, and buying during market dips for future gains.
Focus on Economic Fundamentals, Not Headlines
We believe that market movements depend more on economic fundamentals than on the latest news. Corporate earnings remain strong, with S&P 500 earnings expected to grow by about 11% year-over-year in the second quarter of 2025. This echoes the period from 2018 to 2019 when the market learned to focus on real growth over fears from trade tensions.
The Federal Reserve is likely to support the markets by cutting interest rates soon. Currently, there’s a nearly 90% chance of a 25-basis-point cut at the September FOMC meeting. This prediction is reinforced by solid consumer spending, with July 2025 retail sales up by a healthy 0.6%.
We foresee ongoing short-term volatility, which presents clear opportunities for traders. The VIX index is around 18, indicating market uncertainty, making options premiums appealing for sellers. In these conditions, selling cash-secured puts on strong companies or major indices during market dips could be a wise move.
This strategy allows you to earn income from the premium while establishing an entry point for a long-term investment. With the 10-2 year Treasury yield spread remaining positive at about 25 basis points, the risk of a significant recession that could disrupt this strategy seems low.
Defensive Strategies For Risk Protection
For those wanting to safeguard their gains, the current market offers some effective defensive strategies. Buying protective puts on a major index like the SPX can serve as insurance against sudden market drops. A collar strategy, which involves purchasing a put and selling a call on a stock you own, can also offer protection at a lower cost.
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by VT Markets
Aug 7, 2025
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