UBS House View Monthly

The UBS House View Monthly presents the latest version of the UBS Investment House View, assessing the impact of current economic trends on asset classes and portfolio allocation.

UBS House View Monthly

The bright side of Brexit?

What was initially reported as armed robbery turns out to be a misunderstood negotiation. No, I am not talking about what occurred in Brazil with four US Olympic swimmers. I am talking about Brexit. Many had feared that a UK vote to exit the EU would represent a significant setback for global markets. Instead, aside from the impact on the UK pound, the post-Brexit plunge lasted only a few days, as the reassuring Bank of England (BoE) response and stronger data elsewhere have allowed markets to focus on global growth. Now, all three US stock benchmarks are near record highs. Emerging market (EM) equities are at one-year peaks. High yield bonds have held up in spite of volatile oil prices. And, at the other end of the risk spectrum, the demand for developed market government debt is such that 40% of it now trades with a yield below zero.


Our diversified portfolios and overweight positioning in US equities have benefited from the post-Brexit rally. Over our six-month tactical investment horizon we remain confident that markets still hold upside. We are overweight US equities and US investment grade debt over high grade debt, as well as emerging market equities over Swiss equities.

But can we go further and point to something beyond a neutralization of the Brexit concerns? What might it take to see a potential bright side to the much-discussed vote? At a global level, the Brexit experience is promoting the debate on the limits of monetary policy, which could prove beneficial if it leads to more coordinated monetary and fiscal stimulus. And for the UK itself, Brexit might offer a historic opportunity to improve its economic fortunes, if the country follows the right role models.

Mark Haefele
Global Chief Investment Officer Wealth Management


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