The wealth management firm argues that investors mustn't capitulate as markets are hit by concerns about inflation, rates and disruptions.
Clients should stay invested in markets even though conditions are volatile, UBS argues, echoing a theme from other banks about how it is a mistake to abandon the field.
“Looking ahead, the main driver of markets in the second half of this year will be investor perceptions of whether we are headed for stagflation, reflation, a soft landing, or a slump. We believe that it is important for investors to stay invested,” Iqbal Khan (pictured), co-president UBS Global Wealth Management, told a recent conference in Singapore.
His colleague, August Hatecke, who is co-head UBS Wealth Management Asia-Pacific, said: “While the economic outlook for H2 might be challenging, we stress the importance of being invested, arguably more defensively at this stage in view of elevated inflation levels. Against the current macroeconomic environment, investors may wish to diversify with alternatives through hedge funds and endowment-style investing.”
Such views chime with recent comments from Citigroup. The US bank told this news service a few days ago that Investors should think about moving cash into high-quality bonds to protect against inflation and position for a likely rally in the tech stock sector that has been indiscriminately pulled down this year.
Elsewhere at the Singapore conference, UBS’s Khan said that as Asian countries reopen from Covid-19 restrictions, he predicts an increase in the number of family offices and entrepreneurs in the new economy sector.
The rise in digital adoption among clients is why the Swiss bank has launched UBS Circle One in APAC – an innovation to bring the best actionable investment ideas to clients, Khan said.
“We recommend that investors should look to build a robust portfolio that can grow regardless of where the global economy heads. They should prioritise a liquidity portfolio that meets three to five years of cash flow needs, consisting of a mix of cash, cash alternatives, and short-duration bonds,” Tan Min Lan, head chief investment officer, Asia-Pacific at UBS Global Wealth Management, added. “Adding to defensive and quality value stocks should be considered, while capital-protected strategies can be used to mitigate downside risks. Also, investors with holding power could use the sell-off to build longer-term positions in areas where structural fundamentals remain intact. Such themes include 5G, greentech, the ABCs (artificial intelligence, big data, cybersecurity) of tech, and China’s digital economy leaders.”