Why we have increased our global equity exposure

UBS
By November 14, 2018 02:02

Why we have increased our global equity exposure

UBS House View

Global equities continued to recover from October's sell-off – recouping over half their 9.5% decline. Markets remain fragile, with weaker momentum and higher volatility. And fundamental risks from US-China trade tensions and a 40bps rise in 10-year US real yields persist. Despite these risks, the sell-off offers a buying opportunity. Even using our own cautious earnings estimates and factoring in the first rounds of US-China trade tariffs, valuations still look favorable. Emerging markets (EM) and Eurozone markets trade on 12-month-forward price-to-earnings (P/E) ratios of around 11 and 12 times respectively, discounts to their 30-year averages of 13 and 14 times. While US stocks are trading slightly above their longterm forward P/E, they still look appealing versus bonds, with a forward equity risk premium of 4.8%, versus a long-run average of 3.2%. The market may also be underestimating the potential for positive surprises, such as a deal between the US and China on trade. 

UBS
By November 14, 2018 02:02

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