The market is still not pricing in recession risk, and stocks have yet to bottom, UBS managing director says

• Markets are underestimating the risk of an economic hard landing, UBS' Michael Zinn warned.
• Zinn pointed to recent corporate earnings, many of which have fallen below analysts' estimates.

The market isn't pricing in the risk of a recession, and stocks still haven't hit a bottom, according to UBS managing director Michael Zinn.

"The market probably hasn't really quite priced in the likelihood of a harder landing, the likelihood of an earnings recession," Zinn said in an interview with CNBC on Thursday. He pointed to the latest round of corporate earnings reports, as some companies have reported disappointing figures and are anticipating more headwinds next year.

Other commentators have warned the stock market will be hit with an earnings recession as firms continue to battle high inflation and persistent rate hikes from the Fed. Bank of America, Morgan Stanley, and Deutsche Bank have all predicted a 20% crash in stocks next year as a recession takes hold of the economy.

A downturn next year would follow the Federal Reserve's aggressive interest rates in 2022 to lower inflation. Fed Chair Jerome Powell signaled the central bank will continue to keep rates high throughout next year, but some market bulls see the central banker dialing back interest rates sooner, which could spark a new stock rally.

That scenario is unlikely to happen, Zinn said, as Powell has repeatedly pointed to inflation indicators like a hot labor market to justify continually restrictive monetary policy. Zinn predicted the market had "half-bottomed," and the Fed wouldn't consider easing rates until it saw at least four "good months" of inflation and job data.

"I think the market is underpricing a hawkish Fed. The Fed is clearly telling you to be wary of persistent inflation," he said, noting that yields on the 6-month Treasury had surpassed 4%. "Even if you think this is a worthy debate, you're being paid pretty well to stay on the sidelines and watch the action unfold."