Markets: The pound is undervalued relative to the USD – UBS

Economists at UBS continue to believe that a disciplined, diversified, and far-sighted approach to investing will remain the best way to grow capital over the long term.

Key quotes

“We recently shifted an overweight in emerging market equities to an overweight in emerging market hard-currency sovereign bonds, given that, in our view, these bonds look closer to pricing our downside scenario than EM equities.” 

“We remain overweight US high yield credit, US TIPS versus high grade bonds and a basket of select EM currencies. We also see the British pound as undervalued relative to the US dollar.”

“We think investors should seek those stocks with earnings that are relatively resilient to our virus scenarios, such as companies exposed to the 5G rollout in Asia; fintech, ecommerce, online gaming, and online education; as well as China property stocks listed in Hong Kong, and Japanese automation and machinery companies.” 

“We also recommend global quality stocks including European companies with solid cash flows and exposure to emerging markets, and select companies in the US consumer discretionary, communication services, and tech sectors.”