This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

UBS Global Asset Management: All Eyes Still On Central Banks For Driving Asset Class Returns

THE UBS GLOBAL ASSET MANAGEMENT Cyclical Market Forum, held quarterly to discuss three plausible economic scenarios and their potential implications for investments over the next 12 months, found its 4Q13 Forum dominated by discussion over the continued effects of central bank activity on asset prices. While most of the participants had a positive outlook for risk assets in 2014, there was debate about whether there was too much optimism for the year ahead. Curt Custard, the chair of the Forum, said, “My big worry is that markets have not priced in the chances of a policy error, which is a very real threat."

Three market scenarios are proposed at each Cyclical Market Forum and are debated by UBS Global Asset Management (UBS) investment teams managing approximately USD 642 billion globally, as of September 30, 2013. Participants included investment teams covering equities, fixed income, multi-asset portfolios, hedge funds, currencies, commodities and real estate.

UBS Cyclical Market Forum 4Q13 Economic Scenarios Under Consideration

  • Scenario 1 –"The song remains the same" – represents a consensus scenario, in which global growth remains modest, while inflation remains subdued. The world remains in low gear, with industrialized countries closer to their trend growth and emerging countries lagging their (higher) trend growth rates. This scenario is supportive for most global asset classes, as growth is low enough to maintain accommodative policy in many regions, but high enough to continue recovery from the financial crisis.
  • Scenario 2 – "The party gets going" – represents the most bullish scenario, in which growth is closer to historical trends for all industrialized countries except for the eurozone. Emerging countries take advantage of the ensuing export opportunities, but still grow below the speeds experienced in the last 20 years. The US and Japan are the stars of this growth episode, which gradually allows peripheral European countries to get back on their feet, thanks to more supportive monetary policies. This scenario is strongly positive for developed and emerging markets equities, while fixed income in developed markets would likely produce negative total returns.
  • Scenario 3 – "European policy mistakes spoil the party" – represents the most bearish scenario, in which actions by the European Central Bank (ECB) or other institutions lead to a return to recession in Europe, where inflation falls close to zero. The effects of a slowdown in Europe spill over to other regions, leading to negative returns for both developed and emerging markets equities, and mixed results for fixed income and alternative asset classes.

A majority of the Cyclical Market Forum participants voted Scenario 1 as the most likely. The bullish Scenario 2 was voted as the second-most likely, while the bearish Scenario 3 was seen as the least likely outcome. In terms of asset class expectations, a clear majority of participants expect developed markets to outperform emerging markets in equities and in currencies, while emerging markets debt was expected to outperform developed market bonds. The participants agreed that the outcomes for most asset classes would be significantly impacted by the actions of central banks, particularly the US Federal Reserve (Fed), the European Central Bank (ECB) and the Bank of Japan (BoJ), which are all on different trajectories in terms of tightening or expanding accommodative policies.

1 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG

Markets

DOW 17,976.31 +263.65 1.49%
S&P 500 2,086.24 +25.22 1.22%
NASDAQ 4,947.4410 +56.2220 1.15%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs