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The Chief Strategist at UBS Investment Bank, Bhanu Baweja, warns that the "visibly tiring" US consumer will weigh on stock prices, potentially leading to another 8% drop in the S&P 500. Key economic indicators—including employment expectations, consumer confidence, and spending outlook—are indicating weakness.
Baweja projects the S&P 500 could fall to 5,300 points as profit estimates decline over the next three to four months, as quoted on a Bloomberg article. Despite the S&P 500 recently climbing to a two-week high, uncertainty remains due to the potential economic impact of sweeping US tariffs set to take effect on April 2.
The S&P 500-based exchange-traded fund (ETF) SPDR S&P 500 ETF Trust SPY has retreated 3.4% over the past month (as of March 24, 2025). In comparison, inverse S&P 500 ETFs like ProShares Short S&P500 ETF SH has added 3.5% and ProShares UltraShort S&P500 SDS has gained 6.4% over the past month.
Profit Estimates Facing Further Cuts
While some analysts at JPMorgan Chase & Co., Morgan Stanley, and Evercore ISI suggest the worst may be over, citing investor sentiment and seasonal trends, UBS remains cautious (per the above-mentioned article). Analysts now forecast S&P 500 earnings to grow 9.5% in 2025 (as of March 24, 2025), down from the 12.5% projection earlier this year.
Bullish on Bonds, Cautious on Long-Term Yields
Baweja has turned more optimistic on bonds, as a slowing economy is cutting inflationary concerns. He favors two-year US Treasuries over 10-year bonds, expecting the former to benefit more from potential interest rate cuts by the Federal Reserve.
If you want to follow UBS, tap ETFs like iShares Short Treasury Bond ETF SHV and SPDR Bloomberg 1-3 Month T-Bill ETF BIL. Both ETFs yield over 4% each annually (read: Investors Flock to Cash-Like ETFs Amid Market Turmoil).
However, he cautions that the long end of the yield curve may lag, partly due to declining foreign demand for US government debt. iShares 20+ Year Treasury Bond ETF TLT could continue to be a loser. The TLT ETF has lost 1.8% past month (as of March 24, 2025).
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iShares 20+ Year Treasury Bond ETF (TLT): ETF Research Reports
ProShares UltraShort S&P500 (SDS): ETF Research Reports
SPDR S&P 500 ETF (SPY): ETF Research Reports