UBS' Ponczek on Markets, Strategy
- 00:00I understand when you say there is really not one solution given that investors all have different goals but is there maybe a key theme. The markets should follow in all of this volatility. It's great to see you again Cherry of course and when we think about what's going on right now in Ukraine driving the market volatility it is very devastating. But if we are strictly talking about markets what can investors do. As simple as it might seem and as difficult as it probably is realistically it's best for investors to try to stay calm because if you look at key military conflicts dating back to 1945 yes it's true that in the first week following those conflicts markets were lower. We saw the stress play out. But three months later and 14 of 18 of those occasions markets were actually higher with a median return of positive 2 percent. So you asked what can investors do. Amid all of this volatility yes it's very difficult. It's very uncomfortable. But key the key solution is really to try to stick to your long term goals and try to tune out the noise. Try to tune out the volatility occurring in markets day to day. We have seen some investors say that perhaps China is your next bet at this point. Given that they seem to be sort of out of sync whether it is monetary policy tightening around the world or even all of the impact and the volatility from the war in Ukraine we would agree with that at UBS. We have been growing incrementally more optimistic on China. For one if we just look at the dispersion across global markets that we saw last year the MSCI China index was down about 23 percent last year. Meanwhile if you look at global stocks by way of the MSCI World Index it was up about 17 percent. So a massive massive gap. So that makes you question OK why such a gap. But of course the reasons for that was one the regulatory concerns in China last year and also slowing growth. But at this point we do believe that we could see a bottoming out in slowing growth helps by easing from the PDC. And that likely the worst of the regulatory concerns coming from the Chinese government are behind us. But now of course when you are dealing with a market like China you can still expect volatility. And you have to understand that regulatory concerns could come back to the fore. Right. So you got to go in with some upside for a risk but in fact it is these really beaten down big tech names that you're starting to find value in. Well when we look at mega CAC Tech in China we do feel more comfortable now than we felt six months ago just because we do feel as though much of those regulatory risks are played out. But if we think about mega cap tech at large obviously if you look at market cap tech globally of course much more so in the United States this year we have seen a big hit to tech with the prospect of rising interest rates and as market interest rates have risen. So we've been saying for quite a while now. Makes sense to make sure that if you look at your portfolio from a holistic perspective make sure you don't have all of your eggs in one basket. You don't want your allocation towards five big tech names to be getting too too large. But there could be other areas and small mid-cap tech where there's opportunity down the road. So we heard from Fed Chair Pound today he's ready to go with a quarter point maybe even a bigger move. How do you position for that rising rate environment within fixed income. So this has been a theme for quite a while and we have seen much of this play out in markets already. But it is amazing to see the changes that we are seeing quickly unfold. It was just a couple of weeks ago that markets were pricing in about seven rate hikes from the Federal Reserve. That's now since come down. And Powell is of course expressing that the Fed can be very nimble. But when you ask. OK. How do you actually position for this. It can be difficult because you don't want to just dump your core fixed income portfolio. You can diversify say with floating rate fixed income investments. So think about areas like senior loans or private credit if you can deal with the illiquidity of that but diversify your core fixed income holdings so that as interest rates rise you don't feel the brunt of that in your portfolio. And you have specific nation.
