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Challenging the UBS House View

Every month, we invite global investment leaders from the fund management industry to challenge our UBS House View. We address global financial questions to make sure we never sin through over-confidence.

This month's discussion focused on the changing dynamics of trade negotiations and how they affect the economy, the state of the economic cycle and US-EU convergence, and the prospects for monetary and fiscal stimulus.

Macro summary

Global growth has stabilized at a low level, but the outlook in terms of the balance between growth and inflation is positive.

Investment summary

Participants generally agreed that US and EU growth is likely to converge in the coming years. The question is whether it 'converges up' or 'converges down.'

Podcast

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Outside View

  • All participants agreed that trade tensions are unlikely to be resolved in the foreseeable future. They think that trade discussions disappearing from the headlines could suffice to move the market higher. A meaningful uptick in business spending, in their view, requires more than a postponement of current tariffs: an intellectual property agreement between the US and China is probably needed.
  • Participants mentioned stabilizing manufacturing activity. The spillover from manufacturing to service doesn't seem enough to them to push the current slowdown into a major recession. They think continuing consumer strength, especially in the US, shows that monetary policy is starting to be effective.
  • Regarding monetary policy expectations for next year, many participants expect another Fed cut early as they anticipate a weak start to the year in the US. Some participants expect another 10bps cut from the ECB.
  • Participants also focused on the impact of long-term underlying trends and the shift toward incorporating environmental, social, and governance factors into investing. They believe it is important for investors to understand which sectors, countries and companies will benefit from those trends and which will be hurt, and adjust their portfolios accordingly.

UBS House View

  • The US and China have agreed in principle to a partial trade deal. But a number of issues were either left unresolved or unclear. We think not enough was achieved to alter the global economic outlook meaningfully. Global growth is slowing and below trend; there is scope for earnings disappointment; and uncertainty keeps weighing on business investment. We maintain a modest underweight to equities.
  • UBS continues to focus on earning yield rather than looking for higher equity prices. It is certainly possible that equities finally break out of their trading range of the last six months. However, after a strong year for balanced portfolios, we think it is prudent to be more critical about the current valuation, growth, and geopolitical outlook.
  • In our view, the policy outlook portends continued sluggish expansion. We remain confident that central bank actions will still limit the risk of a US or global recession and the chances of a major selloff in risk assets. While there are some grounds for optimism on fiscal policy stimulus, in our view there is little hope of meaningful policy expansion unless the economy deteriorates.
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November 2019 UBS Investor Forum

The future of sustainable investing

13:09

In the November session of UBS CIO's Investor Forum, Mark Haefele, Global CIO, Amanda Young, Global Head of Responsible Investment at Aberdeen Standard Investment, and James Purcell, Head of Sustainable Investing at UBS CIO, discuss the future of sustainable investing, the multiple innovations in the field, and the need for a deep understanding of investors' expectations.

Explore more podcasts

Visit the archive of past UBS Investor Forumpodcasts for additional discussions.

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