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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

UBS Global Asset Management: Will It Be Smooth Sailing Ahead, Or Is This The Calm Before The Storm?

Stocks in this article: UBS

THE UBS GLOBAL ASSET MANAGEMENT Cyclical Market Forum, held quarterly to discuss three plausible economic scenarios and their potential implication for investments over the next 12 months, found its 2Q14 Forum dominated by discussions over continued strong market returns and low volatility levels across many asset classes, as well as concerns that potential negative shocks to the global economy have not been fully priced into the markets. Curt Custard, the chair of the Forum, said, "The marketplace seems more consensus-oriented than I've seen in a long time. A policy misstep from the central banks or a rise in geopolitical tension could rattle the currently benign environment."

Three market scenarios are proposed at each Cyclical Market Forum and are debated by UBS Global Asset Management investment teams across a wide variety of asset classes, including equities, fixed income, multi-asset portfolios, hedge funds, currencies, commodities and real estate. As of March 31, 2014, UBS Global Asset Management had approximately USD 674 billion in assets under management globally.

UBS Cyclical Market Forum 2Q14 Economic Scenarios Under Consideration

  • Scenario 1 – "Carry on regardless" – In this consensus scenario, the global environment of subdued growth and low inflation continues. US growth continues to be mostly supported by consumer spending, while investment growth continues to disappoint. The European Central Bank's (ECB) new measures are not a quick fix for the eurozone's recovery, leading to modest GDP growth. Despite the occasional surge in geopolitical tension and some uncertainty within China's shadow banking sector, emerging markets continue their gradual rebalancing, which is supported by a relatively accommodative global monetary policy stance.
  • Scenario 2 – "Carry on cruising" – In this bullish scenario, global recovery is led by strong growth in the developed markets. As business confidence remains strong and monetary policy stays accommodative, investment spending becomes the main driver of recovery within the developed markets. Upside surprises from both inflation and growth will significantly increase export demand from developed markets, which will benefit emerging economies. Despite a normalization of monetary policy in the US, capital outflows from emerging markets are still limited, as domestic growth, supported by stronger external demand from developed markets, remains robust.
  • Scenario 3 – "Carried out" – In this bearish scenario, the expectation of stronger growth in developed markets never materializes. In the US, rising inflation and falling unemployment—driven primarily by lower labor market participation rates—signals to the market and the US Federal Reserve (Fed) that potential growth is much lower than pre-crisis levels. In the eurozone, the ECB's new measures prove insufficient to stimulate growth. China continues to deal with shadow banking problems, and other emerging markets are hit by lower external demand and reduced risk appetite.

A majority of the Cyclical Market Forum participants voted Scenario 1 as the most likely, the bullish Scenario 2 as the second-most likely and the bearish Scenario 3 as the least-likely outcome. In terms of asset class expectations, a clear majority of participants expected developed markets to outperform emerging markets in equities and currencies, while emerging markets debt was expected to outperform developed market bonds. The participants agreed that the outcomes for most asset classes will likely be significantly impacted by the actions of major central banks. In particular, attention was focused on the following aspects: 1) whether the ECB will increase its monetary easing policies or continue to rely on the Fed's policies to support the global recovery, 2) whether the Bank of Japan (BoJ) will tighten its monetary policies, or continue with economic stimulus as it has done under "Abenomics" and 3) whether the Bank of England (BoE) will adopt tightening measures to slow the economy, or risk building up a bubble, particularly in the housing market. While the market has priced in some of these actions, a surprise may throw off the markets and could lead to unexpected volatility.

1 of 5

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
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!

Markets

DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

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