UBS Strategist Predicts Continued Market Volatility Amid Global Economic Slowdown

The spike in market volatility seen in early August was a “huge overreaction,” according to Gerry Fowler, head of European equity strategy at UBS. He noted that a weaker-than-expected U.S. jobs report and a hawkish shift by the Bank of Japan had driven volatility to extreme levels, with the VIX index surging to 65 before retreating. Fowler expects volatility to remain elevated as uncertainty looms over the global economy.

Fowler believes the volatility spike was excessive, but noted that moderate levels of volatility should persist as markets respond to concerns about a potential U.S. economic slowdown and job losses. Future jobs data, including nonfarm payrolls and jobless claims, will be critical in determining whether the current slowdown leads to a recession or if rate cuts will stabilize the economy.

Fowler anticipates that markets will stabilize at higher volatility levels, trading within a range, though not seeing the strong upward momentum observed earlier this year. The outlook remains cautious as the global economy navigates this uncertain period.