We expect two rate cuts this year, starting in September: UBS' Nadia Lovell

Welcome back to Spark Box, just 1/2 an hour till the 1st opening bell of the third quarter. Joining us right now is Nadia Lavelle, Senior U.S. equity Strategist at UBS. Good morning to you. So we're into the second-half here. What are you expecting and what are you doing? Yeah. You know, we expect the market to remain in an uptrend in the second-half of the year. Of course, not to the magnitude that we saw in the first half of the year though, over 14%. What's what's really needed to be able to drive this market high is going to be the earnings season. The fact is that valuation as we know is really stretch as we head into this. The upcoming earnings season expectations are high versus the first quarter because the forward estimates has remained quite resilient coming into this quarter. But we do think that, you know, with better economic growth, we're seeing that Atlanta Fed GDP now at 2.2%. And the fact that we've had a pretty robust AI investment cycle, that should be enough for companies to be able to meet those higher expectations. How much of your thesis is premised on a rate cut in the in this calendar year? Our expectations is with two rate cuts. However, that does not mean that the market needs that to move higher. The market is already showing that to be the case in the first half of the year. It's really the earnings that's going to drive it. But our expectations, there's two cuts started in September. We think that the economy is pointing towards a soft landing when you look at the upward trend in unemployment as well as the initial jobless claims. Of course, cool PC that we got last week was quite encouraging. We're still on that disinflation path. And so we do think that the Fed will have enough data by the time we get to September to be able to start cutting interest rates. The election. Does it have any relevance or bearing on anything you just said? The election, of course, we're watching it, but we've been advising clients not to make any major shifts in their asset allocation due to the lumen election. Of course, we expect volatility to pick up. It typically does every election cycle. We're already seeing a kink in the fixed features contracts around around the November elections. And what we're watching for, of course, is the rhetoric around tariffs. We know that former President Trump has proposed a 10% across the board and 60% on imports coming for China. That has implications for companies as well as inflation. It could help some of the sectors that are more exposed to competition for China. But at the same time, it will be a headwind for those with supply chains abroad. We also, you know, watching for, you know, corporate taxes. We know that President Biden has proposed an increase in the corporate tax rate to the high. 20% range and so that how obviously has implications for corporate earnings. Those are the things that we're keeping an eye on, but we're not making any major shifts to portfolios due to the election.