Taking stock and looking ahead

Video: Positioning for a broadening rally (10 mins)
Video: CIO’s Kiran Ganesh on why nostalgia isn’t an investment strategy, either (4 mins)

What’s happened?
Markets have moved fast in January. Precious metals prices have jumped. At the time of writing, gold has risen 17% year-to-date, with sharp swings in recent days, and silver is up about 40%. Brent crude oil is up almost 15%. The US dollar has weakened, falling around 3% against the Swiss franc, 1.5% against the Japanese yen, and about 5% against the Australian dollar. The euro hit a four-and-a-half-year high against the US currency at 1.20.

In the US, the S&P 500 broke the 7,000 mark for the first time intra-day on Wednesday. Globally, Chinese stocks are off to a strong start to the year (MSCI China: +7.5% year-to-date), and Japanese equities have also performed well.

Bond yields have been relatively stable, although there have been intermittent signs of concern at the long end of the yield curve. Japanese government bonds, for example, experienced volatility amid concerns about the country’s fiscal outlook (10-year JGB yield: +18 basis points year-to-date).

Thinking in a portfolio context versus point forecasts
We believe the big picture outlook remains consistent with the views we described in our Year Ahead publication, even if some trends are playing out more quickly than we had projected.

While we are happy to see our base case targets for the year exceeded in January, managing a portfolio goes well beyond just looking at point forecasts and entails thinking about the relative performance of its constituents, rebalancing, and seeking more diversification. With this in mind, we think the magnitude of some of these moves may give many clients a great opportunity to rebalance their allocations, diversify to take advantage of a broadening rally in several asset classes, or use options and structures to protect gains.

One of the forces that we believe is driving some of the large market moves is growing investor uncertainty about geopolitics. Typically, investing around geopolitical headlines is not a good way to add value when compared to understanding earnings growth and economic growth. Nonetheless, the increasing government interventions to pick winners and losers in the market creates a situation where we can have a much wider range of potential market scenarios. We believe one of the most effective ways of dealing with a broader range of scenarios is to increase asset class and regional diversification.

Aligned with our view to seek greater diversification, below we present our views on a number of portfolio building blocks:

Commodities
With a positive base case outlook and the risks still tilted to the upside, in our view, we believe investors should retain exposure to gold—we believe an up-to-5% portfolio allocation can be an effective long-term hedge against geopolitical risks.

At the same time, after such a strong rally, we believe that investors can improve portfolio robustness by considering replacing some direct gold exposure with solutions with a degree of capital preservation. Alternatively, investors can consider broadening exposure across the commodity complex. Income-seeking investors can also consider monetizing the relatively high volatility in gold.

At this stage, we believe silver should be considered a speculative asset that could be subject to significant near-term gains or losses. Investors should size allocations accordingly.

Currencies
For currencies, we believe investors should revisit their strategic currency allocation before making tactical moves. First and foremost, investors should try to align the currency of their portfolio with the currencies of their spending patterns and liabilities. This can reduce the risk that potentially large currency swings undermine financial goals.

For larger investors, diversifying across major currencies with strong fundamentals can help preserve global purchasing power. Strategic allocation should consider factors like valuation trends, perceived "safe haven" status, current account balances, and reserve currency roles.

Investors can achieve the right strategic mix through a combination of reallocating cash or fixed income balances, by hedging equity exposures, or through direct currency trades. Tactically, we believe there is upside for the Chinese yuan, Australian dollar, and Norwegian krone against the US dollar, and favor holding a basket of emerging-market carry currencies.

Tech and equities
We think investors should retain exposure to stocks but focus on broadening, both to capture the widening opportunity set and to diversify potential specific risks.

In AI, we believe investors should broaden exposures from large single stocks in the “enabling layer” of the value chain (for example, semiconductors) to also incorporate those in the “application layer,” which we expect to lead returns in the year ahead.

Investors with excessive exposures to technology should seek to diversify into the broadening US sector opportunity set, including financials (which should benefit from strong capital markets activity and a supportive yield curve), health care (structural growth), consumer discretionary (cyclical beneficiary and potential support from the US administration’s “affordability” agenda), and utilities (beneficiaries of rising power demand).

We also believe that investors should take a global perspective to benefit from the opportunity set across Europe, China, Japan, and the US. We see upside potential across all major markets, and investors can both capture opportunities and manage region-specific risks by broadening equity market exposures.

Fixed income
Fixed income markets have been relatively calm compared to currencies and commodities.

We think investors should retain a tilt toward quality bonds, given relatively tight credit spreads for lower-rated credits. Investors should also be mindful about long duration (10-plus-year) exposures, as concerns about the sustainability of fiscal policy and/or about long-term inflation are likely to have a greater impact on the long end of the curve. We prefer duration in the middle part of the yield curve.

Alternatives
Alternatives can add resilience to portfolios. Hedge fund exposure can reduce portfolio sensitivity to broad market moves, add active management flexibility, and strengthen protection against downturns. Our focus is on non-directional strategies, discretionary macro, multi-strategy funds, and merger arbitrage. Private equity continues to offer strong growth potential at attractive entry points. Finally, real estate and infrastructure offer compelling entry points, in our view, supported by long-term trends like reshoring and digitalization.

Updating our forecasts
For updated bull, bear, and base forecasts, please see the table below and the following publications:
Global forecasts: 29 January 2026
Gold run to continue published 29 January 2026
UBS House View Monthly Extended February 2026 published 22 January 2026
UBS House View Monthly: Nostalgia is not an investment strategy published 22 January 2026