More growth, less heat

Evidence tier: A1 Evidence type: Auto-discovered official publication Source: UBS Media Official publication date: 2026-07-07 Captured: 2026-07-18T16:33:10.348Z

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<table><thead><tr><th scope="col">Asset Class</th><th scope="col">Overall / relative signal</th><th scope="col">UBS Asset Management's viewpoint</th></tr></thead><tbody><tr><td>Global Equities</td><td>Overweight </td><td>We remain overweight global equities. Earnings remain strong in the US and most regions, and both US and global growth is still resilient. We prefer the US, Japan and EM vs. Europe, the UK and Australia.</td></tr><tr><td>US</td><td>Overweight </td><td>We remain overweight US equities. We believe growth will improve through the start of this year, and that the Fed will maintain a dovish bias. Furthermore, earnings growth is strong among high-quality stocks and US corporates continue to show adaptability to shocks. </td></tr><tr><td>Europe</td><td>Underweight </td><td>We are underweight European equities, as earnings growth remains weaker than other regions, and we see increased competition in manufacturing with China. We like European banks, which should benefit from strong earnings.</td></tr><tr><td>Japan</td><td>Overweight</td><td>We are overweight Japanese equities, which we believe should benefit from high domestic nominal GDP growth and improved earnings. More stimulative policy combined with a weak JPY may also support future earnings growth.</td></tr><tr><td>Emerging Markets</td><td>Overweight </td><td>We are overweight EM equities as earnings are strong across most regions. The MSCI EM index is heavily weighted toward North Asian tech giants – which should still benefit from the AI capex cycle over the medium term.</td></tr><tr><td>Global Government Bonds</td><td>Overweight</td><td>We moved overweight duration as we believe bonds offer protection for risk assets should growth weaken. The labor market still looks soft, and we are more concerned with downside risks to employment than upside risks to inflation.</td></tr><tr><td>US Treasuries</td><td>Overweight</td><td>We have upgraded US Treasuries, as we value the hedging properties in case the labor market surprises to the downside, particularly as we think the Fed will maintain a dovish bias this year, with more interest rate cuts likely.</td></tr><tr><td>Bunds</td><td>Underweight </td><td>We are underweight bunds as we believe German growth is on the precipice of picking up amid increased fiscal spending which is set to support growth through 2027. The ECB has signalled it is on hold; a further recovery should cause hikes to be priced in out years.</td></tr><tr><td>Gilts</td><td>Overweight</td><td>We remain overweight gilts as we find valuations are attractive, with decent fiscal premium already imbedded into the curve. While the BoE continues to deliver a gradual easing cycle, downside risks to employment may accelerate the pace of rate cuts. </td></tr><tr><td>JGBs</td><td>Neutral</td><td>We are neutral on Japanese government bonds. Although the BoJ is likely to raise interest rates further, later this year, we expect it will act slowly, while carry costs of shorting JGBs are elevated due to the low BoJ policy rate.</td></tr><tr><td>Swiss</td><td>Neutral</td><td>We are neutral on Swiss bonds. While the domestic economy remains lackluster, valuations are expensive and the market is pricing in some chance that the SNB will cut rates into negative territory.</td></tr><tr><td>Global Credit</td><td>Overweight</td><td>We are constructive on credit. Several fundamental and technical factors support tight spreads, including low default rates, steady upgrades, resilient corporate earnings and strong inflows. Asia HY continues to offer the most attractive risk-reward. </td></tr><tr><td>Investment Grade Credit</td><td>Neutral</td><td>IG spreads remain exceptionally tight, while earnings and balance sheets remain solid, helping limit downside risks. Looking ahead, the US IG market will have to increasingly absorb supply related to AI capex financing needs.</td></tr><tr><td>High Yield Credit</td><td>Overweight</td><td>We expect spreads to remain range-bound amid sub-2% default rates, rating migration toward higher-quality buckets and yield-seeking behavior. HY now trades at an average coupon close to its current yield-to-worst, indicating that the refinancing cycle has likely passed its most challenging phase. Together, these factors create a favorable backdrop for carry-driven returns.</td></tr><tr><td>EM Debt Hard Currency</td><td>Neutral</td><td>We are neutral on EMD in hard currency but overweight local currency EM debt, as we expect EM currencies to strengthen.</td></tr><tr><td>FX</td><td>N/A1</td><td>N/A1</td></tr><tr><td>USD</td><td>Underweight</td><td>We remain underweight the USD, as we believe US rates have room to compress relative to the rest of the world. Most developed market central banks have signalled an end to their easing cycles, while there is a good chance the Fed continues to cut rates this year. </td></tr><tr><td>EUR</td><td>Overweight</td><td>The EUR remains range-bound; however, we think risks are tilted toward a slow move higher as the ECB remains on hold and there are signs of an improving global manufacturing cycle. We also favor long EUR against GBP, with UK rates likely to decline amid weakening employment data.</td></tr><tr><td>JPY</td><td>Underweight</td><td>We stay underweight JPY as we think interest rates remain too low relative to inflation and wages, even with the BoJ hiking every 6 to 12 months. This is particularly the case with Takaichi’s fiscal plans skewed toward expansive fiscal policy. </td></tr><tr><td>CHF</td><td>Neutral</td><td>We are neutral on the CHF, as an expensive valuation and low yield are counteracted by strong balance of payment inflows.</td></tr><tr><td>EM FX</td><td>Overweight</td><td>We favor high carry EM currencies, including BRL and HUF, which both offer high real interest rates and attractive valuations. </td></tr><tr><td>Commodities</td><td>Overweight</td><td>We reintroduce an overweight in gold. After a spike in volatility last fall, pricing has realigned with fundamentals and continued central bank buying is supportive; the position also diversifies against risks around fiscal sustainability, central bank independence and geopolitics. </td></tr></tbody></table>

More growth, less heat

More growth, less heat

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