UBS warns Fed may intervene with rate cuts if S&P 500 falls further

From Financial Modeling Prep: 2025-04-08 07:38:00

UBS analysts warn that a further 5-10% drop in the S&P 500 could trigger Federal Reserve intervention due to escalating tariffs. The new tariffs could lead to a 23% trade-weighted tariff rate, increasing inflation and stalling economic growth, potentially causing a recession.

The aggressive tariffs may result in stagflation, with higher production costs and lower demand. UBS predicts a potential 5-10% decline in the S&P 500 could prompt the Fed to implement rate cuts to support the market, known as the “Fed put.”

Global trade tensions are rising with tariffs impacting Asia and other countries. UBS suggests that de-escalation in tariff negotiations, Fed monetary easing, or government fiscal support could stabilize the market, though no immediate action is expected.

The U.S. Treasury Secretary indicates no imminent policy shifts despite discussions with numerous countries. Federal Reserve Chair Powell’s cautious approach suggests delayed rate adjustments pending clearer economic data, tying U.S. monetary policy to market performance.

UBS’s analysis links U.S. monetary policy to market performance amid tariff pressures. Fed intervention could boost markets temporarily, but without trade tension de-escalation, economic slowdown risks remain high.

As uncertainties and pressures mount, monitoring growth trends and risks is crucial for investors. The impact of tariffs and potential Fed responses will shape U.S. market trends for the remainder of 2025.



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