Mixed Sector Outlook as Growth Stalls
UBS highlights that tariff pressures and currency swings are hitting industries like autos, transport, tech hardware, luxury goods, and food and beverage particularly hard, according to the report. This means many companies in these spaces may see earnings downgraded, though select firms could be outliers to the trend, as per the Investing.com report.
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Group 1: Shorted Stocks That May Surprise
The team of strategists has found out two interesting groups of stocks to watch this quarter, according to the report. The first group includes companies with improving earnings outlooks but still heavily shorted by investors; names like Antofagasta, Poste Italiane, and SAAB stand out as potential positive surprises, as per the report. The team wrote that these companies “could see a Q2 surprise,” as quoted in the Investing.com report.
On the flip side, stocks like Anglo American were flagged among those with deteriorating revisions and a crowded long position, posing potential downside risk, as reported by Investing.com.
Group 2: Firms Tracking Ahead or Behind on Profits
The second group comprises companies whose first-quarter EBIT figures were either significantly ahead or behind expectations, according to the report. Firms like Boliden, Adidas, Iberdrola, BMW, Galp Energia, and Orsted have already reached over 30% of their full-year EBIT estimate and may be poised to upgrade their outlooks, as reported by Investing.com.
Meanwhile, companies like Lufthansa, H&M, IAG, and Nokia, which lag behind on earnings, might need to temper their full-year guidance if their second-quarter results do not close the gap, according to the report.
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Cautious on 2025, Optimistic for 2026
UBS strategist Gerry Fowler stressed that “Outlook statements matter more than earnings, though,” noting that any commentary that looks positively into 2026 could be rewarded by markets, as quoted by the Investing.com report.
However, the bank remains cautious on 2025 because of tariffs and slowing sales but anticipates a rebound in 2026 due to cyclicals tied to stimulus and consumer dissaving, as reported by Investing.com.
Signs of Resilience in Select Sectors
According to the report, sector PMIs point to broad-based resilience, with software, industrials, business services, and construction materials showing healthy trends, and by contrast, banks, autos, and mining were identified as laggards.
UBS highlighted that while banks “were amongst the strongest in recent years,” recent PMI data indicates a more fragile near-term outlook, and the bank believes investors should “hang on to cyclicals for the 2026 upswing,” pointing to the long-term potential despite current market headwinds, as reported by Investing.com.
FAQs
Why is UBS expecting no growth this quarter?
Because of economic pressures like tariffs and currency shifts, many sectors are facing a slowdown, keeping growth flat overall.
What sectors are expected to struggle most?
Autos, tech hardware, luxury goods, transport, and food and beverage are seeing the most pressure.
