Preference for U.S. equities, U.S. high-yield credit and the U.S. dollar. Underweight for the euro and Swiss franc.

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Watch Mike Ryan, CFA, Chief Investment Strategist, UBS Wealth Management Americas, 
Regional Chief Investment Officer for Wealth Management U.S., deliver the fourth-quarter investment outlook.

Given the relative success of quantitative easing at boosting the U.S. economy, the European Central Bank (ECB) is undertaking strong measures to help strengthen the Eurozone. However, the policies may prove more difficult to implement than anticipated, according to the Chief Investment Office Wealth Management Research (CIO WMR) in the latest UBS House View: Draghi's dominoes (PDF, 2 MB).

An anticipated domino effect
The first step is for the ECB to buy assets quickly through asset-backed securities (ABS). This could help repair Europe’s ABS market, but the question remains if the estimated EUR 100 billion purchase will be enough to have the desired impact.  Even if sufficient asset purchases can be achieved, it doesn’t necessarily translate to much-needed increased lending activity. However, the ECB hopes that the asset-quality review of banks at the end of the year will help increase confidence in lending practices and, therefore, contribute to growth. These events are designed to lead to moderate inflation, which will help offset a potential deflationary cycle that prevents consumers and businesses from future spending and investment.

What should investors do?
CIO WMR continues to take a pro-risk stance with a preference for U.S. equities and U.S. high-yield credit in fixed income. In foreign exchange, CIO WMR is overweighting the U.S. dollar and the British pound and underweighting the euro and the Swiss franc.

This month’s edition of UBS House View (PDF, 2 MB) also includes a special section on the impact of Fed policy decisions and specific asset allocations for U.S. investors, in the “In context” article from Mike Ryan on page 7.

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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