UBS Group believes the U.S. economy is on the verge of a new economic cycle similar to the "Roaring Twenties" of the last century, with a 50% probability of this prosperous period emerging. The term "Roaring Twenties" refers to a decade marked by significant economic growth, booming construction activities, and increased household wealth.
UBS Americas Head of Asset Allocation Jason Draho suggests that although some economists are worried about rising unemployment, recession, or stagflation, the balance is likely to tip towards a period of prosperity for Americans. According to a recent report by Draho, by UBS standards, the U.S. economy has already entered another "Roaring Twenties".
Draho states, "It's neither too early nor overly optimistic to say that the U.S. is experiencing a 'Roaring Twenties' economy. The pertinent question is whether these conditions will persist, not if they will materialize." He notes that the likelihood of this bullish scenario is increasing, supported by recent developments in demand, supply, and monetary policy.
Investor sentiment is increasingly converging on the view that the U.S. economy will achieve a soft landing. A survey by The Financial Times in September of 37 economists found that most do not expect an economic contraction in the coming years. This optimistic outlook was established before the Federal Reserve's anticipated rate cut last month. Since then, the market has perceived the rate cut as a move by the Federal Open Market Committee (FOMC) to rebalance unemployment rates, thereby ensuring productivity and economic activity.
Draho remarks, "Given the current trends, by early 2025, only the most pessimistic investors would need to look through rose-colored glasses to see a clear path to the 'Roaring Twenties'.
