Overweight U.S. and Eurozone equities and U.S. high-yield credit; underweight emerging market equities

Against the backdrop of plunging oil prices and the euro, as well as the Swiss National Bank’s decision to remove the floor of the Swiss franc, investors must maintain a disciplined approach through diversification and rebalancing their portfolios, according to the Chief Investment Office Wealth Management Research (CIO WMR) in the latest UBS House View: On icy roads. (PDF, 1 MB)

Navigating current conditions

The European Central Bank has finally found a genuine means of expanding its balance sheet, announcing a EUR 1.2 trillion purchase of bonds over 20 months. CIO WMR believes this quantitative easing will pressure the euro and provide a tailwind for Eurozone equities. Lower oil prices will continue to provide a positive backdrop for U.S. equities and the U.S. economy, with equity markets expected to end the year up around 7% – 8%. Emerging markets (EMs), however, should continue to face headwinds such as a stronger U.S. dollar, slowing growth in China and difficult business conditions in Brazil and Russia.

What should investors do?

CIO WMR recommends remaining well-diversified, including alternative investments, and avoiding overexposure in any one area. Overall, CIO WMR prefers U.S. and Eurozone equities U.S. high-yield credit, and is maintaining an underweight position in EM equities and in EM dollar-denominated bonds.

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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