Increase overweight to U.S. equities and high-yield credit; reduce exposure to emerging market equities

Recent market volatility could signal concern for investors. However, given continued strong economic data from the U.S. and the fact that markets have rebased their expectations for slower global growth, there are more reasons to be optimistic about the markets moving forward, according to the Chief Investment Office Wealth Management Research (CIO WMR) in the latest UBS House View: Half full or half empty? (PDF, 2 MB)

Why CIO WMR sees the glass as half full

Despite a global sell-off in equities, volatility in fixed income markets and weaker economic data from the Eurozone, CIO WMR remains optimistic in the overall global fundamentals. This is due to strong growth coming from the U.S., including positive data from non-farm payrolls, jobless claims, consumer confidence and manufacturing sentiment. CIO WMR also expects the Eurozone bank stress test to increase confidence in lending, with the possibility that the European Central Bank could eventually extend its asset purchases beyond covered bonds.

What should investors do?

CIO WMR retains a positive view on risky assets, with increased overweight positions in the U.S., specifically for U.S. equities and U.S. high-yield credit. Growth is strongest in the U.S. where consumers will benefit from declining oil prices and continued central bank flexibility. Meanwhile, CIO WMR is underweighting emerging market equities, offering potential protection for investors in the event of renewed market volatility.

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

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