Paul Donovan

Oil and “follow the money” There was a critical reason the 1973 oil price shock was negative for the global economy. Simplistically, consumers in countries that liked to consume (like the United States) gave money to oil produc...

Oil and "follow the money"

The relationship of higher oil prices to global growth depends in part on whether oil revenues are spent or saved.

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The great US consumer The US labor market remains the critical driver of the US economy. In 2025, US consumers spent more and saved less of their income to afford tariffs. That requires job security. The US labor market is...

The great US consumer

The raft of US data puts the consumer, and drivers of the consumer, into focus. It is not what consumers say but what they do that now matters.

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Tariff affordability US Treasury Secretary Bessent signaled US importers could expect to pay a 15% tariff. US President Trump had mentioned this, but endorsement by an administration official adds credibility. The effect ...

Tariff affordability

US Treasury Secretary Bessent signaled a 15% tariff. Meanwhile, sharply rising US gasoline prices may build affordability worries.

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SUV drivers sensitivity US President Trump said that the US International Development Finance Corporation will offer to insure tankers in the Gulf, and the US Navy will escort tankers through the Strait of Hormuz as soon as ...

SUV drivers' sensitivity

US President Trump pledged to keep Gulf oil flowing. Gasoline prices are a political focus in the US affordability crisis.

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War and long-term economics Near term, the rise in oil and gas prices are not yet economically threatening (they would need to stay high for longer). Dollar strength may be less about safety, and must partly reflect the need to ...

War and long-term economics

The near-term economic consequences of Gulf war may be less dramatic than the news cycle. Long term, some economic risks are emerging.

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Economic impacts Events in the Gulf make dramatic viewing. The humanitarian cost of war is always horrible. The economics of the current situation are less dramatic. The inflation consequences depend on a sustained in...

Economic impacts

Events in the Gulf are dramatic. There are economic impacts, but these will be less dramatic than social media feeds might imply.

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Killing the vibe Consumer spending dominates economic activity, with government and corporate spending trailing far behind. Consumer spending covers a wide range of activities, from housing to having fun. But retail s...

Killing the vibe

The German consumer is a lot more robust than people think—it is data, not reality, that is killing the vibe

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Inflation (but not the really exciting sort) Assorted provinces of the Euro empire will be releasing their flash February consumer price inflation data. There is little expectation for any drama in this data. The overall inflation picture in Eur...

Inflation (but tnot the really exciting sort)

Inflation pressures in the Eurozone remain conspicuously benign. Distortions in seasonal price increases may moderate US producer prices.

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More tariff threats? The Bank of Korea left rates unchanged, as every economist predicted. There was forward guidance (regrettably, the Bank of Korea likes the Federal Reserve’s fabled “dot plot” approach, and adopted a r...

More tariff threats?

US trade policy has been marked by uncertainty. US Trade Representative Greer suggested further, higher tariffs for some goods

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Inflation perception vs reality: The conflict between data and voters' view on cost of living Paul Donovan, UBS Global Wealth Management's chief economist, breaks down the economic messages from President Trump's State of the Union address.

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The state of the world US President Trump delivers a State of the Union address to Congress. Normally, these are not market moving, but investors will look for two things: will there be more tariff threats in the written re...

The state of the world

Reality is better than perceptions, but that does not help politicians very much

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Welcome back uncertainty US trade policy uncertainty increased over the weekend. The Supreme Court ruling against IEEPA tariffs was not unexpected. US President Trump imposing a 10% universal tariff, then raising it to 15%, w...

Welcome back uncertainty

Comments from US President Trump over the weekend have increased uncertainty about trade, with details lacking

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Arresting times This week, former South Korean President Yoon Suk Yeol was sentenced to life imprisonment for leading an insurrection. The presiding judge referred to the execution of Britain’s King Charles I in 1649...

Arresting times

Economies do best when no one is above the law. Rule of law encourages innovation and investment, and can reduce excess regulation.

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Giving weight to risks US President Trump suggested that Iran had 10 or 15 days to do a deal, or face (unspecified) negative consequences. The US military presence in the Gulf means investors have given more weight to these...

Giving weight to risks

US President Trump suggested negative consequences for Iran, absent a deal in 10 to 15 days. Investors are giving weight to this threat.

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The Fed will cut, stay unchanged, or raise rates The Federal Reserve’s meeting minutes showcased a full range of opinion, with advocates of rate cuts, a long pause, and the possibility of rate increases. Were it not for the inability of the minutes ...

The Fed will cut, stay unchanged, or raise rates

The Federal Reserve minutes offered a full spectrum of possible policy outcomes. Cuts remain likely, but not immediately.

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Après Lagarde, un économiste? The Financial Times reports ECB President Lagarde will leave office before their term ends—allowing a successor to be appointed before next year’s French presidential elections. This makes little diff...

Après Lagarde, un économiste?

ECB President Lagarde is reported as intending to leave before their term expires. This does not matter near term. It does matter longer term.

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A friend of mine got a degree in PPE from Oxford, had a successful career in education, then became a plumber in his late 40s. For the past 18 years I have a side hustle as a farmer, which has received little benefit from having studied the politics and government of the Soviet Union 35 years ago.

Solid consumption signals The UK January labor market data was not especially surprising. Bonus payments were slightly weaker than expected, one of the unemployment measures (the ILO) was a fraction higher, but payrolls were s...

Solid consumption signals

UK labor data and German consumer prices remind investors that rising real incomes support a trend-like (somewhat dull) level of consumption.

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Japan offers a hope of growth US January consumer price inflation data had several moderating influences. Used car prices (the curse of every economist) fell sharply. The fictitious owners’ equivalent rent (the largest component i...

Japan offers a hope of growth

Japan’s economic growth disappointed expectations, but the details offered a bit more hope for future economic activity.

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Getting emotional One definition of an asset is a store of value, free from emotion. While analysts can disagree about the relative importance of the things that drive an asset’s value, the value is objectively determi...

Getting emotional

Asset prices should not be driven by emotions—but emotions still matter to economic behavior

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What can consumers afford? US January consumer price data is due. The focus should be on the details more than the headline. The largest part of the consumer price calculation is a fictitious housing price that people don’t pay...

What can consumers afford?

US January consumer price inflation data is due. The headline number isn’t necessarily what matters to perceptions of affordability.

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Cooling cut expectations The January US employment report signaled sufficient strength to cool market expectations of an urgent US rate reduction. There is no evidence of political interference in the data. However, the data ...

Cooling cut expectations

The US employment data cools expectations for an urgent rate cut, but leaves a need for rate cuts to come later.

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Employment report Wednesday We get the delayed January US employment report and benchmark revisions for the past two years. For markets what is important is that economies respond to reality, not reported data. Whatever the empl...

Employment report Wednesday

US employment revisions do not change the reality—US consumers seemingly had a low fear of unemployment in 2025.

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The “Heated Rivalry” threat US President Trump’s social media accounts published an attack on Canada, threatening to block the opening of a US-Canada bridge (named after a Canadian hockey player), and suggesting a Canada-China t...

The "Heated Rivalry" threat

US President Trump’s social media account posted a broad attack on Canada. Markets are likely to discount this.

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The fatal flaw in using bitcoin as a currency There is a crypto parallel in the aftermath of Europe’s 14th century bubonic plague

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Politics impacts markets Japan's governing LDP looks to have won a two-thirds majority in the lower house, which means the upper house cannot stop legislation. The next focus is the budget and how a proposed consumption tax c...

Politics impacts markets

Japan's LDP won the lower house elections with a sizable majority, changing market perceptions of policy.

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What really matters in volatile times The volatility of some financial markets produces stirring financial media headlines. However, most major equity markets (other than the US) are up on the year. Precious metal volatility (up and down)...

What really matters in volatile times

Despite the volatility of some financial markets, it is the underlying economy that matters. Fundamentals should be the focus.

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Cutting tariffs US President Trump’s social media post suggests a deal has been done with India to reduce the tariffs paid by US importers (from 35% to 18%, with special tariffs relating to Russian oil purchases set ...

Cutting tariffs

US President Trump’s social media accounts announced a tariff reduction. It is unlikely to affect US affordability concerns.

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Has FOMO lost its mojo? The sharp decline in gold and silver prices has relatively little economic significance. While attempts will be made to spin this as a reaction to fundamental economics, it seems more likely that the ...

Has FOMO lost its mojo?

Gold and silver prices are correcting - any asset that moves (up or down) to align with fundamentals is a good thing in the long term.

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Affording the dollar’s decline The broad-based drop in the value of the US dollar this year has been rapid. Traditionally, a weaker currency is associated with higher inflation.

Affording the dollar's decline

Traditionally, a collapsing currency heralds consumer price inflation. Modern trading behavior has weakened that relationship.

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