Internal Year Ahead 2020 The Year of Choices & The Decade of Transformation UBS Global Wealth Management Chief Investment Office November 21, 2019
Global growth is slowing down Real GDP growth (in %), including forecasts (2019-2021) Source: UBS, November 11, 2019 1 Please see important disclaimer at the end of the document.
CIO Global Risk Map: More balanced risks around trade Source: UBS, as of November 14, 2019 2 Please see important disclaimer at the end of the document.
Investors now face a "Year of Choices" Select UBS Investor Watch concerns Source: UBS, as of 12 November 2019 3 Please see important disclaimer at the end of the document.
Choice #1: Stick or twist? Proposed income tax plans by US presidential candidates Source: Saez and Zucman, taxjusticenow.org, as of 13 October 2019 4 Please see important disclaimer at the end of the document.
Choice #2: Deal or no deal? Trade Policy Uncertainty Index, monthly (log scale) Source: Caldara, Dario, Matteo Iacoviello, Patrick Molligo, Andrea Prestipino, and Andrea Raffo “The Economic Effects of Trade Policy Uncertainty,” International Finance Discussion Paper, Federal Reserve Board of Governors, as of 1 October 2019 5 Please see important disclaimer at the end of the document.
Choice #3: Fiscal or monetary? US growth and deficit (lhs), US debt (rhs) Source: International Monetary Fund (IMF), St. Louis Fed, UBS, as of 29 October 2019 6 Please see important disclaimer at the end of the document.
How to position in a Year of Choices Views by asset class • Look for quality and dividends Equities • Go domestic over global • Choose consumer over business • Choose the middle lanes Fixed income • Choose sustainable over traditional Currencies • Choose barbells over greenbacks: Commodities • Go precious over cyclical Alternatives • Opt for lower beta Real estate • Choose late cycle winners Source: UBS, as 12 November 2019 7 Please see important disclaimer at the end of the document.
Equities: Go consumer vs. business Global manufacturing and services PMIs Source: JPMorgan, UBS, as of 31 October 2019 8 Please see important disclaimer at the end of the document.
Equities: Go domestic vs. global Domestic vs. foreign exposure for listed companies in select regions, in % Source: Morgan Stanley, as of 30 May 2019 9 Please see important disclaimer at the end of the document.
Equities: Go quality and yield Eurozone bond yields, equity dividend yields, in % Source: Factset, UBS, as of 25 October 2019 10 Please see important disclaimer at the end of the document.
Bonds: Avoiding negative yields Amount of negative yielding debt, in USD trillions Source: Bloomberg, UBS, as of 31 October 2019 11 Please see important disclaimer at the end of the document.
Bonds: Drive in the middle of the road Select yields on bonds hedged to the US dollar, in % Source: Bloomberg, UBS, as of 22 October 2019 12 Please see important disclaimer at the end of the document.
Currencies: Turn away from the US dollar Interest differential is waning, and so too should US dollar strength Source: Macrobond, as of 5 November 2019 13 Please see important disclaimer at the end of the document.
Commodities: Precious over cyclical commodities Gold performance over select time periods of crisis, in % Source: Bloomberg, UBS, as of 30 October 2019 14 Please see important disclaimer at the end of the document.
Global tactical asset allocation Source: UBS, as of November 14, 2019 15 Please see important disclaimer at the end of the document.
The Decade of Transformation Source: Haver, CEIC, National Statistics, UBS, as of 21 October 2019 16 Please see important disclaimer at the end of the document.
Deglobalization: Global trade-to-GDP has peaked Trade as a % of global GDP Source: The World Bank, UBS, as of 31 December 2017 17 Please see important disclaimer at the end of the document.
Tech disruption: Pace of change is accelerating Number of years required to reach 50m users Source: UBS, as of 22 October 2019 18 Please see important disclaimer at the end of the document.
Wealth redistribution: Inequality at a multi-year high US net wealth shares held by bottom 90% vs. the top 0.1%, in % Source: Deutsche Bank, as of 1 October 2019 19 Please see important disclaimer at the end of the document.
"Monetary policy 3": How to manage Federal debt? Gross federal debt held by the public as a % of GDP Source: Bloomberg, UBS, as of 30 April 2019 20 Please see important disclaimer at the end of the document.
Demographic change: Shifting working age population Size of population in ages 15-64, in thousands Source: United Nations, Department of Economic and Social Affairs, as of 29 October 2019 21 Please see important disclaimer at the end of the document.
Environmental action: More climate change regulation Sum of global executive and legislative actions globally Source: Climate Change Laws of the World database, Grantham Research Institute on Climate Change and the Environment and Sabin Center for Climate Change Law, as of 18 October 2019 22 Please see important disclaimer at the end of the document.
Expect lower returns Select asset classes, risk and return, in % Note: Asset classes include: USD cash, USD high grade bonds, USD high yield, EM sovereign bonds, US equities, EM equities (USD), Eurozone equities, Swiss equities, Hedge funds (USD) Source: Bloomberg, UBS, as of 21 October 2019 23 Please see important disclaimer at the end of the document.
Digital transformation More than 10x growth expected in data from 2020-30, digital universe in zettabytes Source: Bloomberg, UBS, as of 21 October 2019 24 Please see important disclaimer at the end of the document.
Genetic therapies DNA editing trials Source: Bernstein, UBS, as of 31 September 2018 25 Please see important disclaimer at the end of the document.
Water Water imbalances in the 16 most populous countries, in % Source: The Factbook (CIA), UBS, as of 1 April 2019 26 Please see important disclaimer at the end of the document.
Sustainable disruption Global levelized cost of energy (LCOE), in USD/kWh Source: IRENA, UBS, as of 31 May 2019 27 Please see important disclaimer at the end of the document.
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