World’s biggest wealth manager says now is the time to sell shares

On the back of trade war fears, UBS is now underweight equities. 

As a result of growing risks to the global economy and markets, UBS the world’s biggest wealth manager, is reducing its exposure to shares.

In their House View weekly round-up, UBS’ chief investment officer Mark Haefele, announced “we are reducing risk in our portfolios by moving to an underweight in equities.”

The key risks facing markets, Haefele says, is the trade war between the US and China. Haefele writes: “The US-China trade dispute has escalated in recent days, raising the risk of a cycle of retaliation that undermines global growth and equity markets. That justifies a reduction in risk in our portfolios in order to lower our exposure to an uncertain political environment.”

The wealth manager, however, is not totally bearish, noting that the money it manages for clients is in a "risk neutral" position and cautions against investors adopting “large equity underweights as if they were preparing for a typical recession or the next great financial crisis.”

Indeed, Haefele notes: “We still believe the US can avoid a recession in 2020, helped by additional Federal Reserve easing and strong consumer spending.”

Instead, UBS’ stance is that with talks between the US and China dominating market moves over the near term, investors should brace for higher volatility.

Moreover, another factor driving UBS becoming more cautious on shares is its negative outlook for emerging market equities. Haefele argues that emerging market firms are likely to act more volatile in the event of a slowing global economy or escalating trade war.

Other professional investors have also turned more bearish of late, with just over one in three (34%) respondents to the Bank of America Merrill Lynch Global Fund Survey saying they believe a recession is “likely” in the next 12 months, the highest number predicting an imminent recession since October 2011.

UBS is also underweight UK equities, adopting a wait and see approach amid Brexit uncertainty. This morning (28 August) it was announced the government will suspend parliament from 10 September to 14 October.    

Wealth manager Brooks Macdonald is also underweight the UK. Edward Park, deputy chief investment officer, at the firm, says: “With the outcome of Brexit remaining volatile and unclear, sterling will remain under pressure and trade within a range that reflects the dual possibilities of a deal and a disruptive exit. As a result, we maintain our underweight to UK assets despite the valuations on offer.”

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