Citing ‘political uncertainty’ UBS shifts to underweight equity position as US-China trade war escalates further
- US can avoid a recession in 2020, helped by Fed easing, consumer spending, UBS CIO Mark Haefele says
- Downside risks increasing for the global economy and markets, Haefele says
As the trade war between the United States and China further escalated, UBS said it is underweighting equities in its portfolios in its global wealth management business to reduce its exposure to “political uncertainty”.
The Swiss bank said it removed its overweight rating for global equities versus high-grade bonds, while also initiating an underweight rating for emerging market stocks versus high-grade bonds. The bank said emerging market firms are more exposed to “heightened market volatility, a slowing global economy, and heightened trade tensions.”
“We still believe the US can avoid a recession in 2020, helped by additional Federal Reserve easing and strong consumer spending,” Mark Haefele, UBS chief investment officer for global wealth management, said in a report dated Sunday. “We estimate the direct impact of all the additional tariffs will represent only a marginal drag on the US economy. But downside risks are increasing for both the global economy and markets.”
The report came out on a weekend in which investors could not be blamed for feeling whiplash on the trade front, with US President Donald Trump sending out conflicting signals.
On Friday, China said it would add 10 per cent tariffs on US$75 billion worth of US products, prompting Trump to describe Chinese President Xi Jinping as an “enemy” on Twitter.
In a later series of tweets, Trump said he would increase existing tariffs on some US$250 billion of Chinese imports to 30 per cent and begin adding 15 per cent tariffs on another US$300 billion of goods on September 1.