Top of the Morning: CIO Equity Pulse - Monthly performance update & outlook

UBS CIO stays constructive on equities, holding its 8,400 S&P 2027 target despite AI debt jitters, oil-driven Fed hikes, and decelerating earnings growth.

• AI pressure explained: Sell-off in AI/data center names tied to rising debt loads at "neoclouds" and higher rates, not demand weakness—GPU rental prices keep rising, signaling compute is still short.
• Fed outlook raised: CIO lifted its 2025 Fed hike expectation from two to three after a 25bp hike already delivered; still doesn't see the Fed turning restrictive since inflation is oil-driven, not labor-driven.

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