Positive outlook for Eurozone equities and high-yield credit

Since the financial crisis of 2008, USD $5.7 trillion has been printed by the U.S. Federal Reserve (the Fed), Bank of England, Bank of Japan and the European Central Bank combined. Now, central banks are warning that this path is narrowing. And it is not without risks to investors, according to the Chief Investment Office Wealth Management Research (CIO WMR) in the latest UBS House View: The next steps for central  banks .

Investors should be aware of three possible scenarios. 1) Central banks could begin raising interest rates. In fact, CIO WMR believes the Fed will start increasing rates in September. 2) Quantitative easing from central banks could continue indefinitely, increasing risks of overleverage and excess inequality. 3) Most likely, central banks will stay the course, retaining a loose policy before steadily pulling back, according to CIO WMR.

What should investors do?
This backdrop supports CIO WMR’s preference for risky assets, both in equities and high-yield credit, with their largest overweight position in Eurozone equities. In their tactical asset allocation, they are initiating an overweight position in the British pound relative to the Australian dollar. 

To understand how these trends may impact your individual strategy, connect with your UBS Financial Advisor or find a UBS Financial Advisor.

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*The views expressed on the call do not constitute a personal recommendation or take into account the particular investment objectives, investment strategies, financial situation and needs of any specific individuals. They are based on numerous assumptions. Different assumptions could result in materially different results. We recommend that you obtain financial and/or tax advice as to the implications (including tax) prior to investing.