There is more upside for both equity and bond markets – UBS

US equities sit close to their all-time highs and 10-year US Treasuries trade with yields almost 100 basis points below their October peaks. Can equity and bond markets keep rising in 2024? Economists at UBS analyze market’s outlook.

Base case scenario is for a soft landing

Our base case scenario is for a soft landing. Lower interest rates, positive (albeit slowing) economic growth and growing corporate earnings should support modest further upside for equities.

We also think long-term bond yields have room to fall further, given long-term real rates are still higher than the Fed’s estimate of the real neutral rate, in our view. We favor bonds on a risk-adjusted basis.