UBS Investor Forum

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 markets, central bank policies, liquidity and inflation risks in 2020.

Macro summary

Participants generally agreed that the impact of the coronavirus on the economy is likely to be larger than currently expected but also contained to the first quarter of the year.

Investment summary

Most participants believe that stocks outside of the US are more attractive, and generally framed credit debate as one in which growth is 'good enough'.

Podcast

Listen to the latest podcast recorded at the Investor Forum.

Jump to the full recording.

What is the main risk investors should consider?

Poll Form

Outside View

  • Equities – Looking outside the US in equities.
    Most participants agreed that investors need to look outside of the US in order to find value in stocks. Some participants commented that the dividend yield in the Eurozone is attractive, and that the energy transition could provide a catalyst for higher fiscal spending. Others said they had started the year overweight in Europe, EM, and Japan, but now expects US equities to outperform, despite high valuations, because investors will continue to be drawn to the growth and technology investment story there, particularly amid coronavirus risks.
  • UK– A skinny deal enough for sterling?
    Some participants said they expected to see a 'skinny trade deal' agreed between the UK and EU, and for a services agreement to prove challenging. That said, they said sterling 'could be a buy' particularly if higher UK fiscal stimulus means higher interest rates. Others participants also expects sterling to move higher, adding that they would be long sterling over a multi-year outlook because the currency is relatively cheap, and they expects a 'stable' outcome to Brexit.
  • Coronavirus – A large but limited impact.nflation.
    Participants generally agreed that the impact of the virus on the economy is likely to be larger than currently expected, but also contained to the first quarter of the year. Participants expect coronavirus to have a negative near term impact on growth, but retains a positive overall stance on risk unless we see a much more serious impact.

UBS House View

  • Equities – We think it is time for investors to start reallocating to emerging markets (EM). First, we expect the growth differential between emerging and developed markets to widen in EMs’ favour. Second, valuations in EMs are lower than in DMs. Finally, many of the greatest identifiable secular trends in the coming decade of transformation are going to play out in EMs.
  • UK - We believe sterling remains undervalued and can resume its rally, assuming the EU and the UK make progress toward a benign trade deal. As a result, we overweight the GBP versus the USD and recommend not currency hedging UK equities in USD portfolios.
  • Coronavirus – We believe it’s still too early to call a peak to the COVID-19 outbreak, and we think additional bottlenecks and hurdles will continue to crop up. In our risk case of more significant disruptions beyond Q1, we would expect low to mid-single digit downside risks to both supply chain and overall hardware/semiconductor industry earnings globally. We would be inclined to view the drop in markets as an opportunity to add long-term exposure to Asia.

What is your 6 month forecast for the USD?

Poll Form
 

Listen to our latest Podcast here

Positioning your portfolio in a low or negative yield world.

08:36

In the first of this month's podcasts, Mark Haefele, Chief Investment Officer at UBS GWM, is in discussion with Andrew Balls, Chief Investment Officer Global Fixed Income at PIMCO, to exchange views on bond yields, central bank policy, and safe haven, and how investors should think about positioning bond portfolios in a low or negative yield world.

An environment favorable for equity.

05:49

In the second of this month's podcasts, Kiran Ganesh, Head of CIO Investment Communications at UBS GWM, is in discussion with Supriya Menon, Senior Multi-Asset Strategist at Pictet Asset Management, to discuss about equity market performance, coronavirus, global growth, and investment opportunities in equity.

Explore more podcasts

Visit the archive of past UBS Investor Forum podcasts for additional discussions.