Looking past uncertainties in Russia, the U.S. and China to capitalize on broader growth
Mike Ryan, CFA, Chief Investment Strategist, UBS Wealth Management Americas
Regional Chief Investment Officer for Wealth Management U.S.
For investors, uncertainty can be a strong impetus to retreat to perceived “safe havens.” However, in today’s financial markets, there’s no longer such a thing as true “safe havens.” Moreover, if investors are able to look past these uncertain events in a broader context, they will see significant long-term opportunities, according to the Chief Investment Office Wealth Management Research (CIO WMR) in the latest UBS House View: Investing through uncertainty .
Russia and Crimea—where uncertainty can yield opportunity
While recent volatility of events in the Ukraine region has the potential for devastating effects on energy supply and demand in the area, and the broader eurozone economy, CIO WMR believes that significant escalation in this conflict is unlikely, given the strong mutual dependence on oil and gas commerce between the West and Russia. One long-term opportunity that could emerge for investors is in Russian equities, which are trading more than 10% lower in March than in February 2014. CIO WMR believes the strongest near-term opportunities, however, are in reducing holdings in traditional “safe havens” such as the Swiss franc, Japanese yen and high-grade bonds.
U.S.—fundamentals remain strong amid lack of clarity
While it’s expected that the Fed’s tapering measures will continue, more uncertain is the potential rise of interest rates. This would be negative for the bond market but positive for the U.S. dollar. Nevertheless, the impact on equities and the broader economy would be more nuanced due to the overall strength of the U.S. economy, particularly because of the forces driving energy independence in North America. Between 2007 and 2013, employment in U.S. oil and gas rose 40% with many U.S.-based manufacturing executives considering reshoring production to the United States. CIO WMR, therefore, recommends U.S. equities and credit in capitalizing on this growth as well as the U.S. dollar on the currency front.
China—gradual embrace of the free market offsets fears of slower growth
While China’s rapid rise to the second largest economy in the world has been nothing short of remarkable, the drivers of its growth today are somewhat in question. For now, China appears to be countering these measures not through actions by the state but through more openness to market-driven forces. For instance, CIO WMR believes while there is considerable uncertainty in resources in heavy industry, the liberalization of capital markets and energy prices should benefit brokerages and companies helping to improve energy efficiency.
CIO WMR also believes that future technological development holds significant opportunities for investors with improvements in mobile technology and advancement in robotics continuing to impact labor productivity and efficiency, as well as contributing .5%-.7% to global growth over the next decade.
To understand more about how these trends may impact your individual investments and strategy for the year, connect with your UBS Financial Advisor or find a UBS Financial Advisor.
Join us as Mike Ryan, Chief Investment Strategist for Wealth Management Americas, leads this fully interactive discussion featuring the latest on our market views and investment strategy guidance on the first Thursday of every month at 1:00 p.m., ET / 10:00 a.m., PT.
Next call: Thursday, May 1, 2014
U.S. dial in: 1-855-827-6587 (1-855-UBS-MKTS)
Verbal passcode: MARKET
Listen to the replay from our April 3, 2014 call:
Dial in: 1-888-203-1112
*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.
UBS House View delivers a global perspective on the trends likely to impact investors and is the culmination of extensive research and a rigorous vetting process integrating research from our analysts around the world into a single monthly publication.
Products and services mentioned on these web pages may not be available for residents of certain nations. Please consult the sales restrictions relating to the service in question for further information. www.ubs.com
© UBS 2014. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.
Wealth management services in the United States are provided by UBS Financial Services Inc., a registered broker-dealer offering securities, trading, brokerage and related products and services. Member SIPC. Member FINRA.
Notice for Non-U.S. Investors. Order Routing Disclosure. Statement of Financial Condition. Best Execution Statement. Loan Disclosure Statement. Account Sweep Yields. Advisory & Brokerage Services. CFP Board's Trademark Disclaimer. Important Information About Auction Rate Securities.