UBS Global Perspectives

Overview

• Equities: Given US equity’s overvaluation and the uncertainty over the impact of the QE tapering, we continue to prefer equities that are significantly undervalued and have stronger potential for upside surprise, such as UK, German and Japanese equities.
• Fixed Income: We maintain a modest overweight to high yield. Additionally, in preparation to defend against rising rates, we have begun shorting depressed yield curves (e.g., US) and replacing with exposure to healthier yield curves (e.g., Australia).
• Currency: We continue to find some commodity currencies, such as the Australian, New Zealand and Canadian dollars, to be overvalued. Our largest overweight position remains the US dollar, which has benefited from stronger growth, as well as being a safe haven during recent volatility. From a valuation perspective, the USD also appears very attractive as it is trading at historically low relative levels despite recent strengthening, making it an advantageous way to access US economic strength.

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