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Monthly Investment Outlook

Monthly Investment Outlook

We publish a Monthly Investment Outlook that highlights our convictions on equities and bonds, as well as recent asset allocation changes.



Summary

  • MONTHLY INVESTMENT OUTLOOK - Don't fight the Fed
  • GLOBAL TACTICAL ASSET ALLOCATION - Exploit a market correction to add direct equity exposure
  • UBP ECONOMIC OUTLOOK - Look for global growth to recover after subdued Q1 activity
  • UBP ECONOMIC OUTLOOK - A new monetary regime has begun
  • GLOBAL EQUITIES - Exploit a market correction to add direct equity exposure
  • GLOBAL BONDS - ‘Patient’ central banks favour carry strategies in credit
  • RECENT VIEW CHANGES - Exited insurance linked in favour of corporate credit; seeking opportunities in equities

  • The 2019 rally in global equities continued in February as signs of an impending resolution to the US-China trade war emerged and the US Federal Reserve continued its shift begun in January to more overtly dovish rhetoric. The narrowing of corporate credit spreads continued in sympathy though the pace slowed following January’s dramatic rally.
  • Most importantly for investors, recent communications from the Fed and to an extent from its counterparts in Europe and China suggest that central banks have shifted policy trajectories meaningfully. They are now seeking to take efforts to limit the slowdowns in growth evident across regions in recent weeks and also preparing for the prospect of external shocks to growth (e.g. hard Brexit, trade war, EU elections).
  • There are, however, signs that the EU and the UK may yet buy time beyond the 31 March deadline to avoid a hard Brexit. Evidence is also building that tensions on the US-China trade front may de-escalate from here, and our expectation is that growth in the US, China and to a certain extent in Europe should begin to stabilise in the months ahead. The recent Fed moves to end its balance sheet wind down may in fact act to refill the proverbial punchbowl and provide a catalyst to markets looking ahead.
  • As highlighted in last month’s outlook, even with the February rally, carry strategies, especially in euro credit, remain attractive. However, as featured in our 4 February Spotlight, The Fed Returns the Punchbowl to the Party, with the continued shift in Fed policy as a catalyst, we seek opportunities to add directional equity exposure into portfolios. This applies especially to China and Japan particularly if the year-to-date rally pauses over coming weeks.
  • Moreover, with signs that the UK may yet avoid the turmoil of a hard Brexit before March 31, our preference for Swiss and continental European equities in sterling referenced strategies appears less compelling. As a result, we seek opportunities to close our existing underweight positions looking forward.
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Investment Outlook 2019

A look back on UBP's Investment Outlook

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