UBS says shutdown fears are overdone, focus on rate cuts and earnings:
Shutdown impact: Macroeconomic effects are usually minimal and short-lived; GDP drag estimated at ~0.1pp per week, but activity typically rebounds once the government reopens.
Federal workforce: Risks of permanent layoffs limited by legal/practical barriers; any firings would likely face court challenges.
Investment strategy: UBS advises investors to look past shutdown noise and focus on Fed rate cuts, corporate earnings, and AI capex as key market drivers.
Forecast another 75bps of Fed cuts over next three meetings.
Equities: UBS expects S&P 500 to hit 6,800 by June 2026, with a bull case of 7,500.
Gold: Seen at USD 3,900/oz by June 2026 as a hedge against economic/political shocks, including a disruptive shutdown.
Currencies: Shutdown unlikely to shift USD materially; UBS maintains a view of USD weakness over 6–12 months, favouring EUR and AUD for diversification.
