UBS stays positive on markets despite Middle East uncertainty

UBS has expressed optimism about market prospects despite rising geopolitical tensions in the Middle East, as highlighted in its latest report. 

The global investment bank acknowledged concerns over the conflict between Israel and Hezbollah, as well as missile attacks from Iran. 

However, UBS noted that oil prices remain steady, gold is near record highs, and fears of a U.S. recession have lessened.

The UBS Chief Investment Office (CIO) issued an update on October 8, urging investors to stay invested in risk assets despite the uncertainties. 

The report highlighted the historical resilience of markets during international conflicts, with UBS stating, “Selling in response to immediate uncertainty locks in otherwise temporary losses and hampers investors’ ability to participate in the next market recovery.”

According to UBS, the market has shown strength in the face of these geopolitical risks. 

The SP 500, for example, has seen a 32% rise over the past year. 

The bank pointed out that economic data continues to show resilience, with stronger-than-expected job growth helping to ease concerns about a potential U.S. recession. 

UBS also emphasised the importance of inflation data and the Federal Reserve's potential rate cuts later this year.

UBS remains positive about AI-driven equities, especially in sectors such as semiconductors and megacap companies. 

The investment bank advised focusing on quality companies within these industries, alongside capital preservation strategies. 

UBS also recommended considering hedge funds and commodities, including gold and oil, to enhance portfolio resilience.