Mark Haefele, chief investment officer of UBS Global Wealth Management, used to have a negative view of the stock market, but now his views have changed. For most of this year, it was widely believed that interest rate hikes by global central banks and other measures to reduce inflation will hit the US economy and put pressure on stocks.

The Zhitong Finance App learned that Haefele wrote in a report to customers, “Looking back on the past, some economies have been impacted by the actions of the central bank. The performance of major stock indexes was also relatively weak in the summer. Overall, however, we have overestimated the risk that interest rate hikes pose to the global economy and are too pessimistic about the stock market”.

The asset management company has now set a target of 4,700 points for the S&P Index at the end of June 2024, meaning that at current levels, the total return is 7%-8%. Here are the company's latest predictions under different economic scenarios.

August was quite difficult for the stock market. According to FactSet data, the US stock market fell by more than 2.2% weekly last Friday, and the S&P 500 index has fallen by about 4.9% so far this month.

Haefele said that predictions of an unstable economic background enabled UBS to reap revenue from bonds earlier this year. But he now believes that within the next six to 12 months, given the fall in inflation and the expansion of the US economy, even though the Fed rapidly raised its policy interest rate to the highest level in 22 years, the economy is likely to have a “soft landing,” so the share of stocks in its investment portfolio will increase.

Despite this, the team still likes bonds and estimates that by mid-2024, the total return on investment-grade government and investment-grade debt is likely to reach 10%, with low volatility, “which supports our strategy of continuing to prefer bonds over stocks.”

Earlier this week, the benchmark 10-year US Treasury yield rose to its highest level since November 2007, reaching 4.3%, but fell back to around 4.25% on Friday.