Economists at UBS discuss the equities outlook.

Higher volatility expected in the months ahead

“Given a rally driven by only a handful of names, relatively expensive valuations in large-cap growth and technology stocks, and the negative impact of credit tightening on company earnings, we expect higher volatility in the months ahead, and see the S&P 500 at around 3,800 by December.”

“We prefer emerging market stocks, which should benefit from peaking US rates, higher commodity prices, a weaker US Dollar, and China’s recovery.”