UBS: Back to the Future

This should remind us to make predictions with a degree of humility and care. Yet forecast we must in order to identify investments for a globally diversified multiasset portfolio. For reflections on what we got right and wrong this year, along with over 200 investment predictions for next year, please see our just published Year Ahead 2016.1 It is flying around town in a vehicle we did not imagine 30 years ago – cyberspace.

We still have some important hurdles before year’s end – including the US Federal Reserve’s expected December rate hike. But as of the time of writing, we can say that 2015 has been a muted year for investors, with global equities returning around 3% in local currency terms, slightly ahead of high grade bonds. The top-performing markets of the Eurozone and Japan have given returns of over 10%, while emerging markets have lost 6%. The S&P 500, though only slightly in positive territory, has now enjoyed its longest rally without a 20% correction since World War II. As many of you know, we took commodities out of our portfolios in 2014. In 2015 this has been the most disappointing asset class, declining about 23%.

For 2016 we expect equities to return around 7%, supported by a moderate acceleration in global growth, rising earnings, healthy corporate balance sheets, and continued central bank stimulus. Yet volatility will likely increase and we hope to seize the opportunities it presents. We enter the new year preferring equities relative to government bonds. We favor stocks in the Eurozone and Japan, where central banks are set to maintain easy monetary policies. This fact also warrants an overweight position in investment grade and European high yield credit.

Der komplette Marktkommentar und der Ausblick auf 2016 als PDF-Dokumente.