UBS: US-Iran Agreement Reduces Fed Rate Hike Pressure, Next Move is Rate Cut in 2027
On June 15, Leslie Falconio, head of taxable fixed income strategy at UBS Global Wealth Management, stated that following the announcement of the US-Iran agreement, oil prices have fallen, leading to a strengthening of the US Treasury market and a reduction in the pressure on the Federal Reserve to raise interest rates this year. Falconio noted, 'Even before the ceasefire agreement was reached, oil prices had already begun to decline, and the yield on two-year US Treasuries was still rising because the market was pricing in nearly a 100% probability of a rate hike in December at that time.' She added, 'Now the situation is that oil prices are falling, and the market is gradually retracting those rate hike expectations. As a result, the yield on two-year US Treasuries has started to decline.' The newly appointed Fed Chair, Jerome Powell, will preside over his first rate decision this week. Against the backdrop of soaring crude oil prices reigniting inflationary pressures, voices within the FOMC supporting a rate hike this year have been increasing. Falconio anticipates that the FOMC will formally abandon its dovish stance at this week's meeting, making the policy outlook more hawkish. However, she still believes that the Fed's next move will be a rate cut, expected to occur in 2027.
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BUZZ - UBS downgrades AppFolio to “neutral,” stock price falls in response
On October 7th, the real estate software company AppFolio (APPF.O) saw its shares drop by 6.6% to $189.87 on Wednesday, after UBS downgraded its rating from "Buy" to "Neutral," citing slower unit growth and a more balanced risk-reward ratio. The brokerage raised its price target by $20 to $220, while LSEG data shows the Wall Street median price target at $230.81. UBS stated that a tightening multifamily housing market, rising interest rates, and financing constraints could slow user growth, thus lowering the expected FY2027 average revenue per user (ARPU) growth from 6.3% to 5.5%. UBS added that AppFolio's AI and value-added services may still provide upside potential, but product adoption appears to be in the early stages, and client feedback on some services has been mixed. UBS notes that the target price increase is based on raising the FY2028 enterprise value/free cash flow (EV/FCF) multiple from 16x to 18.5x, stating, "Given its higher growth potential, this valuation still remains slightly above re-rated industry peers." Out of ten analysts, eight have a "Strong Buy" or "Buy" rating, while two rate it "Hold." The stock's decline means it is down about 18% year-to-date, significantly underperforming the S&P 400 Software & Services Index's 25% gain. (For the convenience of non-English speakers, Reuters automatically translates its reports into several other languages. Since automated translation may contain errors or lack the intended context, Reuters does not guarantee the accuracy of automated translation texts, which are provided solely for readers’ convenience. Reuters accepts no responsibility for any damage or loss caused by the use of automated translation services.)
French political crisis impacts European bank stocks! Société Générale (SCGLY.US) and Deutsche Bank (DB.US) fall over 5%. JPMorgan says the pullback may offer entry opportunities.
European bank stocks faced another round of sell-off on Wednesday, with Societe Generale and Deutsche Bank shares both dropping by more than 5% at one point.
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