UBS forecasts a shift in Federal Reserve policy with a 25 basis point rate cut anticipated in December 2025, followed by two additional cuts by the end of Q1 2026. The bank argues that current market expectations overestimate the Fed's hawkish stance, as softening U.S. economic data suggests a need for easing. UBS assigns an 84% probability to the initial rate cut, indicating strong confidence in their prediction. The bank projects S&P 500 earnings growth of 11% in 2025 and 10% in 2026, suggesting robust corporate performance despite economic softening. UBS's outlook implies potential benefits for equities, particularly in growth sectors like technology and real estate, as well as for bond prices and gold, which typically perform well during easing cycles. Investors are advised to monitor fed funds futures pricing closely, as discrepancies between UBS's forecast and market expectations could present opportunities or risks.