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 by over-confidence.


What are current key drivers in Emerging Market Fixed Income?

View from the Street

UBS view

Jan Dehn, Head of Research at Ashmore, August 2017

At UBS, we agree that fundamentals in emerging markets are strengthening. Credit spreads should remain supported near current levels by firming economic growth, gradually recovering energy prices and a benign external backdrop. On the other hand, US policy uncertainty could weigh on EM assets. We advise investors to remain neutral on EM credit in globally diversified portfolios.

Do you invest in emerging markets?

Poll Form

What is the outlook for global fixed income markets?

UBS view

View from the street

At UBS, we think that equities will outperform credit at this stage in the business cycle. We are overweight global equities and USD high grade bonds against Euro high yield bonds. We find Euro high yield bonds expensive and don't see spreads compensating for the risks at current levels. On the other hand, global equities valuation is close to its long-term average and can enjoy further upside from continued earnings growth.

We also believe the US Fed will hike rates more quickly than the market is pricing, as labor market slack has been substantially used up and financial conditions are relatively easy. We expect the Fed to gradually tighten to head off the risk of economic overheating, raising rates once more this year and twice in 2018. We believe that the market will gradually reprice in this direction, pushing the yield on the 2-year Treasury higher. We therefore recently opened an underweight in 2-year US Treasury bonds vs USD cash.

Do you see a positive outlook for global fixed income markets ?

Poll Form

Tatjana Greil Castro, Portfolio Manager, Global Short Duration at Muzinich & Co, August 2017


What is your view on policy risk?

View from the street

UBS view

Jeffrey Taylor, Head of European Equities at Invesco, August 2017

At UBS, while we acknowledge a number of global political and policy risks, we do not expect any of them to materialize. Between North Korea's military ambitions, China's efforts to contain a slowing economy, and US policy on taxes and trade, the reliance of global economic stability on the "human factor" remains high for any investor's comfort.

Moreover, as heightened political uncertainty becomes more of a status quo, markets increasingly focus on strong fundamentals and continue to perform well. This makes us comfortable with our mild pro-risk investment stance.

Are you more worried about geo-political risks or central bank policy risks?

Poll Form

How long can global markets tolerate Washington's gridlock?

UBS view

View from the street

President Trump's pro-growth policies, including tax cuts and a boost to infrastructure spending, could support markets, but recent political dysfunction has threatened that agenda. At UBS we agree that optimism waned as investors did not see the kind of progress they expected.

However, we believe US political developments are unlikely to harm global stocks. Markets' lowered expectations leave little risk of disappointment. Instead, investors should focus on solid economic and earnings growth.

Are you worried about Washington's gridlock?

Poll Form

Jan Dehn, Head of Research at Ashmore, August 2017



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