UBS CEO believes a U.S. recession is unlikely, but a slowdown may occur.

• Sergio Ermotti, CEO of UBS, stated on Wednesday that market volatility may increase in the upcoming months, however, he does not foresee a recession in the U.S.
• Last week, global equities experienced significant declines as investors grappled with poor economic indicators from the U.S., which stoked concerns about a potential global economic slowdown.
• This year, the Federal Reserve is predicted to reduce interest rates by at least 0.5%.

UBS CEO Sergio Ermotti stated on Wednesday that market volatility may increase in the second half of the year, but he does not foresee a recession in the United States.

Last week, global equities experienced significant declines as investors grappled with weak economic information from the U.S., which sparked concerns about a potential economic recession in the world's largest economy. Additionally, this data raised doubts about whether the Federal Reserve should adopt a more dovish approach to its monetary policy. Despite keeping rates unchanged in late July at a 23-year high, the central bank's decision has been closely watched.

Ermotti stated that while a recession is not certain, a slowdown of the U.S. economy is possible when questioned about the outlook.

The CEO of the bank stated on Wednesday during a CNBC interview that the macroeconomic indicators are not clear enough to discuss recessions, and it may be premature to do so. However, the CEO added that the Fed has the capacity to intervene and support the economy, although it will take time for any actions taken to be transmitted into the economy.

The Federal Reserve is predicted to reduce interest rates by at least 50 basis points in 2021, with traders debating whether it will be a 50 or 25 basis point reduction at the upcoming September meeting, according to LSEG data.

Ermotti stated in an interview with CNBC that it is likely that the market will experience increased volatility in the second half of the year, due in part to the upcoming U.S. election in November.

He stated that while one factor may be at play, considering the overall geopolitical and macroeconomic picture, the recent volatility observed in the last couple of weeks is a clear indication of the fragility of certain elements of the system. As a result, one should expect a higher degree of volatility.

Another uncertainty going forward is monetary policy and whether central banks will have to cut rates more aggressively to combat a slowdown in the economy. In Switzerland, where UBS is headquartered, the central bank has cut rates twice this year. The European Central Bank and the Bank of England have both announced one cut so far.

According to Bruno Verstraete, founder of Lakefield Wealth Management, who spoke to CNBC Wednesday, the uncertainty surrounding events like the U.S. presidential election caused complacency with low volatility, but now we are transitioning to a more typical regime.

"More volatility can lead to more trading income for UBS, as it is not always negative," he stated.