UBS answers 3 key investors questions for the second half of 2024

UBS analysts have provided insights into the key questions investors face in the second half of 2024 and into 2025.

The S&P 500 has rallied 15% year-to-date, driven by optimism around artificial intelligence and despite persistent inflation and rising interest rates. Here’s how UBS addresses the crucial investor concerns:

Interest Rates and Economic Growth: UBS expects slower economic growth and inflation data to lead to interest rate cuts by major central banks. “We recommend that investors prepare by moving excess cash holdings into quality fixed income,” UBS stated. Lower US interest rates could also weaken the US dollar while supporting commodities. UBS advises investors to “sell into dollar strength and seek opportunities in various commodity markets.”

The AI Investment Opportunity: UBS believes AI represents one of the largest investment opportunities in history. “Investors need to ensure their portfolios are ‘AI-enabled,’” UBS emphasized. Favorable sectors include semiconductor companies and vertically integrated oligopolies in the US and China. However, UBS cautions about the risk of over-investment fears leading to a market correction, recommending capital preservation strategies.

US Election and Market Volatility: With the upcoming US presidential election, UBS anticipates increased equity market volatility. “It is prudent to consider risk management approaches,” UBS noted. They suggest the US consumer discretionary and renewables sectors could be at risk in a Trump victory, while financials may see upside. UBS also highlights gold as an effective hedge against geopolitical and economic uncertainties.

As the year progresses, UBS underscores the importance of positioning portfolios for the evolving landscape of AI, interest rate changes, and the US election, advising a balanced mix of equities, bonds, and alternatives to navigate uncertainties.