UBS is urging investors not to rely solely on the ongoing rally in U.S. equities, arguing that diversification into select Asian markets, higher-quality bonds, and gold will be critical to building more resilient portfolios over the next 12 months. The Swiss bank expects the U.S. bull market to extend, supported by an accommodative Federal Reserve, solid earnings momentum, and continued artificial intelligence-driven investment. But with valuations stretched in some corners of U.S. tech and geopolitical risks simmering, UBS says broadening exposure will help guard against potential bouts of volatility. “We think U.S. stocks can rally further, but we also believe diversification is key for investors to build resilient portfolios for the long term ,” UBS said in a note on Friday. ” Beyond U.S. equities, we currently see the best opportunities in select Asian markets, quality bonds, and gold.” China and Japan ascend China and Japan stand out as the most compelling equity opportunities across Asia, according to the bank’s strategists. In China, the firm sees technology as a structural investment theme, backed by Beijing’s push for homegrown innovation, tech self-reliance, and advanced manufacturing under its policy direction for 2026 to 2030, announced at the recently concluded fourth Communist Party plenum . “We continue to rate China’s tech sector as most attractive and China equities overall as attractive, with double-digit upside expected for the MSCI China Index over the next 12 months,” UBS noted. The MSCI China Index has risen more than 35% year to date, data from LSEG showed. China’s supportive liquidity environment and a shift by retail investors from bank deposits into equities are also expected to act as catalysts, despite ongoing U.S.-China tensions. Japan, meanwhile, is poised to benefit from new Prime Minister Sanae Takaichi’s pro-growth agenda, corporate reforms and structural improvements. UBS expects domestically focused sectors linked to infrastructure, technology and national security to see upside. Takaichi is widely regarded as a disciple of “Abenomics,” the economic policy framework introduced by the late Prime Minister Shinzo Abe that promoted easy monetary policy, increased fiscal spending, and structural reforms. The Nikkei 225 has surged over 25% since the start of the year to record highs recently. Safe havens UBS also recommends adding exposure to high-quality fixed income, in particular, U.S. investment-grade bonds and Treasurys, noting that yields remain compelling even after a modest retreat this year. The 10-year U.S. Treasury yield has fallen around 58 basis points this year, and UBS expects it to drift lower. The bank said quality bonds offer an attractive balance of risk and return, tending to outperform during market pullbacks while still providing decent income at current yields. “We would expect quality bonds to rally in the event of fears about the health of the U.S. economy or the durability of the AI rally,” UBS strategists wrote. Gold also remains a central piece of UBS’s resilience strategy, viewed as an effective hedge against political and economic shocks. The bank still expects further upside as global uncertainty persists. This comes as gold prices recently saw their steepest daily selloff since 2020 . However, bullion prices remain at historic levels of above $4,000 an ounce. While gold prices were volatile last week, UBS views the pullback as a healthy consolidation rather than a structural reversal. It maintains a year-end gold target of $4,200 per ounce, with an upside case of $4,700 if geopolitical tensions rise or U.S. fiscal risks deepen. Lower real interest rates, a softer dollar, and concern over sovereign debt are also expected to fuel further inflows into the metal.
https://www.cnbc.com/2025/10/27/ubs-sees-best-opportunities-in-asia-bonds-and-gold.html
