Daily US

18 September 2026, 09:00 UTC Chief Investment Office GWM Investment Research

The case for investing amid rising rates UBS House View - Daily US Ulrike Hoffmann-Burchardi, Chief Investment Officer Americas and Global Head of Equities, UBS Financial Services Inc. (UBS FS) Mark Haefele, Global Wealth Management Chief Investment Officer, UBS Switzerland AG Vincent Heaney, Strategist, UBS AG London Branch Daisy Tseng, Strategist, UBS AG Singapore Branch Kazumasa Ishii, Strategist, UBS SuMi TRUST Wealth Management Co., Ltd. Teck Leng Tan, CFA, Strategist, UBS AG Singapore Branch

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From the studio Podcast: Europe’s political pendulum swings wider, on Apple and Spotify (26 mins) Video: Market Playbook | Why higher rates alone don't mean lower equities (6 mins) Video: UBS Explains | What is happening in the US bond market? (5 mins)

Thought of the day Market sentiment recovered on Thursday as oil prices fell for a second day. The 10-year Treasury yield fell 6 basis points to 4.94%, while the S&P 500 advanced 1.1%. The equity benchmark now stands at just 2% below the all-time high it reached in August. What to watch: 21 September Brent crude oil remains above USD 100 per barrel, and the war in the • China September loan prime rate Middle East is in its seventh month. With equities near all-time highs and concerns over the sustainability of AI-related investment persisting, a fresh • Chicago Fed President Austan Goolsbee speaks round of central bank tightening and higher interest rates could lead investors to question the case for staying invested. After all, cash feels safe, and market volatility can be unsettling.

But while waiting for certainty may feel comfortable, doing so could pose the greater risk to long-term financial goals.

Cash may not meet long-term return needs. By definition, a portfolio needs to earn a return equal to inflation to maintain its purchasing power. If it must also fund withdrawals, taxes, or a longer-than-expected lifetime, a meaningful positive real return is likely required. In our view, cash is unlikely to meet that hurdle over the long term. Even today's high cash yields are partly offset by inflation and, in many jurisdictions, taxation. We also do not expect the current unusually high real cash rates to persist indefinitely. We estimate the long-run pretax real return on cash at just 0.7%. To overcome the combined challenge of inflation, taxes, longevity, and withdrawals, investors need a higher long-term return than cash is likely to provide.

This report has been prepared by UBS Financial Services Inc. (UBS FS), UBS Switzerland AG, UBS AG London Branch, UBS AG Singapore Branch, UBS SuMi TRUST Wealth Management Co., Ltd.. Please see important disclaimers and disclosures at the end of the document.

Higher rates need not end the equity rally. With the global economy on a solid footing, we think modest further central bank tightening should remain manageable for equity markets. Historically, rate hikes become a greater concern for market performance when economic growth starts to falter. But the relatively limited tightening we expect ahead should not impact economic growth much. We also believe AI-related capex remains a powerful tailwind for earnings growth, with the benefits broadening across sectors and geographies. In addition, improving earnings means that elevated valuations can become more reasonable over time. For example, despite the strong performance in semiconductors this year, the sector’s valuations are now below their average since ChatGPT’s launch in late 2022. Meanwhile, we note that an “all-time high” is neither rare nor a reliable warning signal historically—over the last 100 years, the S&P 500 has traded either at or within 10% of an all-time high for more than two- thirds of the time.

Geopolitical risks rarely alter the long-term case for investing. With no immediate resolution in sight, the current conflict in the Middle East could still escalate, and the energy supply crunch could worsen. But investors should…