Predator or prey?

UBS House View Investor's Guide – July 2021

UBS House View

Our publication "UBS House View" gives you a compact overview of UBS's opinions on the financial markets. Drawing on our global investment and research capabilities, it aims to offer you the best, most up-to-date investment guidance.

You’ve probably noticed that some animals, like chickens, sheep, and zebras, have eyes on the sides of their heads, while others, like wolves, tigers, and owls, have eyes facing front. The first group, whose primary aim is not to be eaten, values awareness of what’s around and behind. For the second group, more focused on the catch, the ability to perceive depth is critical to successfully navigating the world and securing their prey.

For investing, seeing what lies ahead is paramount. Our perception of future economic trends helped us increase our risk asset exposure when virus fears were high last year. It also helped us tilt exposure toward reopening and reflation beneficiaries in September, even before vaccines had been broadly rolled out.

Today, if we just look around and behind us, we see economies reopening, inflation rising, and equity volatility sitting at its lowest level since before the pandemic. But if we look forward, we see something different.

Key topics: What we focus on this month

Reopening momentum

In the second half, Asia will gain momentum as vaccinations drive reopening.

Pressure drop

We expect inflation to fall from current elevated levels as base effects and pandemic-related supply issues dissipate, keeping the pressure off central banks.

Event horizon

More persistent inflation, slower growth, geopolitical tensions, and new COVID-19 variants all pose potential risks to the equity rally.

Asset allocation

We maintain a positive outlook for global equities. We think the best opportunities to benefit from the reopening trade are in Asia. We see further upside in energy, financials, and US small- and mid-caps.

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