ubs economic outlook

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Investment Strategy Guide

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CIO Wealth Management ResearchUS edition

UBS House ViewFebruary 2016

Mind the gapsIn Context : What it will takeIn Focus : Simmering risks unlikely to boil overVideos : Brian Nick on tactical adjustments andJeremy Zirin on market risks


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A MESSAGE FROM THE REGIONAL CIO

The year hasnt gotten o to the kind of

start that any of us had hoped for or ex -pected. Economic data has largely disap-pointed, oil prices have plunged by 25%,and policymakers have sent mixed sig -nals with regard to their intentions. In re-sponse, risk assets have sold o sharply,with global equity markets o to theirworst start ever and credit spreads reach-ing their widest levels since 2011. Not sur-prisingly, the level of anxiety among in -vestors (both institutional and individual)has risen to the point where some nowsee parallels to prior crisis periods.

But is this really the end of the nearlyseven-year-old bull market for nancialassets?

In this months Feature article, we iden-tify the gaps that have arisen acrossthe global landscape and assess their im-pact. These include the gaps betweenstrong consumption and weak manufac -turing, between current oil productionand future demand, and those related topegged currencies. We recommend thatinvestors mind the gaps that thesetransitions are creating and watch formore potentially destabilizing changes,such as a potential Brexit from the EU,or unexpected changes in Federal Re -serve interest rates.

In our In Focus article, investment strate-gists Jeremy Zirin and Brian Nick explainwhy they do not think simmering risks are

This report has been prepared by UBS AG, UBSSwitzerland AG, and UBS Financial Services Inc.Please see important disclaimers and disclosuresat the end of this document.

1 Tactical preferences

2 Feature Mind the gapsby Mark Haefele

8 In context What it will takeby Mike Ryan

10 Preferred investment views11 At a glance

11 Month in review

12 Global economic outlook

14 Asset classes overview EquitiesFixed income CommoditiesForeign exchange

20 In focus Simmering risks unlikely to boil over

by Jeremy Zirin and Brian Nick Video feature

22 Top themes Beyond benchmark xed income

investing

The rising Millennials

Valuing your human capital

24 Key forecasts

25 Detailed asset allocation

32 Performance measurement

35 Appendix

39 Publication details

CONTENTS

Dear reader,

Video featureClick play button to watch

likely to boil over. In their words, while

voices calling this the beginning of aworldwide recession have become louderand more numerous, we see few trulythreatening signs that things are headedin that direction.

In the In Context article, we focus uponthe current correction and what it willtake to stabilize markets. With the burdenof proof now on those with a more con -structive view, markets are apt to remainvolatile in the near term. It is thereforeour view that we will likely need clearerevidence that decelerating US economicmomentum during the fourth quarter wastemporary, indications that commodityprices and the dollar have begun to sta-bilize, con rmation that corporate pro tgrowth has not peaked, and a commit-ment on the part of global policymakersto remain pragmatic in order to arrest thedecline in risk assets.

While we believe that these dynamics willbegin to play out as the year progresses,investors will need to remain patient inthe near term.

Regards,

Mike Ryan, CFAChief Investment Strategist, WMA
http://www.ubspodcast.ch/us/wmr/podcast/en/topofthemorning/160121-UBSHV_Portfolio_Adjustments_BrianNick_3.mp4


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2 UBS HOUSE VIEW FEBRUARY 2016

Currently, we consider the risk and reward for equities balanced. While low oilprices have never provoked a US recession, cheaper crude has not yet provided theexpected boost to the US consumer. Fears of a China hard landing have made globalmarkets acutely sensitive to even minor policy changes or slight disappointments inmarkets and data. The correlation between the Shanghai and US equity marketshas soared, and the recent correction can be traced to a modest 1.5% devaluation

of the Chinese yuan versus the US dollar.

These new sources of volatility need to be digested by the markets to enable themto nd direction. Opportunities to overweight and underweight equity marketsremain, but overall we consider it best to be neutral on equities in our globaltactical asset allocation (TAA). Yet this is no time for investors to abandon long-term investment discipline. We should remember that market falls can representgood opportunities to rebalance portfolios toward long-term strategic allocations.

In the remainder of the letter, I address some of the gaps we are watchingto inform our investment positioning. These include the gap between strongconsumption and weak manufacturing, which is now a global phenomenon; thegap between oil production and demand, which has caused a jarring 75% slide

in prices since summer 2014; and the gaps that are popping up in markets relatedto pegged currencies, which are indicative of the current global instability. In themonths ahead, investors will need to mind the gaps that these transitions arecreating, and watch for more potentially destabilizing changes, such as a possibleBrexit from the EU, or unexpected changes in Federal Reserve interest rates. Some of the gaps caused by market volatility are also creating opportunities.A variety of divergences contributes to our global TAA positioning, such as anoverweight to Eurozone equities, and underweights to emerging market (EM)stocks, UK equities, and government bonds. We are making two changes toour global TAA this month, closing our overweight position in Japanese equities

Mark HaefeleGlobal Chief Investment Of cerWealth Management

FEATURE

Mind the gapsMarket risksInvestors have beenunsettled by fears overChinas transition into theglobal nancial system,worries over the resilienceof US growth, and thefalling oil price.

Watch the gapsWe are monitoring a rangeof dislocations in marketsand the real economy.These include the gapbetween the two Chinesecurrency rates, and di er -ing views on the path of

US interest rates.

Balanced positionAdditional volatility justi esgreater caution and fornow we are neutral onequities in our globaltactical asset allocation.But the recent market fallso er a good entry point for

investors who have beenon the sidelines.

Asset allocationWe initiate an underweightJapanese yen positionagainst the US dollar. Weare also reducing Japaneseequities to neutral, andreducing our UK equityunderweight.


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FEBRUARY 2016UBS HOUSE VIEW 3

relative to UK equities, and initiating an underweight Japanese yen position relativeto the US dollar.

Gap #1: Services vs. manufacturingMy rst gap to watch exists between services and manufacturing (see Fig. 1). Thisis something evident across the world, but perhaps most strikingly in the US and inChina, where manufacturing is in recession, but retail sales growth remains good.

It is clearly a positive that the services sector is holding up well. Not only doesthe services sector make the greatest contribution to most developed economies(and a growing contribution to Chinas), its growth also tends to translate, labor-intensive as it is, into greater levels of employment, con dence, and consumption,when it is humming along.

Investors will need to pay attention to how this gap closes, however. I think weall want to see a recovery in manufacturing sentiment, and this would be a clearand simple positive. But investors will need to watch for any indications that theweakness in manufacturing is infecting the services side of the economy. Onepotential source of contagion is through credit spreads, where borrowing costshave been on the rise in recent months, even for companies outside of the energysector. We will need to remain alert for signs that higher borrowing costs area ecting economic investment and hiring across sectors.

Gap #2: Oil supply and demandThe world had grown used to oil costing more than USD 100 per barrel.

With prices now down by more than 75%, the world is trying to adjust. Theseadjustments are creating uncertainty and volatility: oil majors, US drillers, and state-run energy rms in EM have made dramatic job and investment expenditure cuts. The extent to which many economies rely on oil investment and hiring has, like thescale of recent oil price falls, taken many by surprise. And investment write-downs,

Service industries have beenoutperforming manufacturingby a widening margin.

Manufacturing weakness couldundermine the services sector.

The price of Brent crude hasfallen by three quarters sincesummer 2014...

...which has dented capitalspending by oil rms andfuelled stock market volatility.

FEATURE

Fig. 1: US services strength vs. so er manufacturing sector

Source: Bloomberg, UBS, as of 31 December 2015

Index level

2005 2006 2007 2008 2009 2012 2013 20142010 2011 201530

35

40

45

50

55

6065

ISM manufacturing ISM non-manufacturing

The gap between USmanufacturing and servicesactivity is near its highest in adecade.


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deleveraging, and tighter credit conditions will continue to stoke price instabilityand global growth concerns until oil nds a oor.

Investors will need to watch oil inventories for indications that the dramaticsupply-demand imbalance is easing (see Fig. 2). In OECD nations, crude stocks areapproaching three billion barrels of oil around 300 million barrels more than the

ve-year average. Until signs that this excess is clearing appear, uncertainty aboutthe sector and its knock-on e ects is likely to hold sway. This should a ect EMmost severely, and we hold an EM equity underweight in our global TAA.

Gap #3: Pegs vs. pressureA third type of gap investors will need to watch is that popping up in the forwardand interest rate markets of pegged currencies, indicative of potential trouble tocome. These are most evident, at present, in Saudi Arabia, China, and Hong Kong. Saudi Arabias peg to the US dollar has held rm since 1986, but has recentlycome under speculative pressure, thanks to the sharp decline in oil prices. Forwardmarkets are pricing in a 2% fall in the riyal (or a 20% probability of a 10% drop)against the US dollar. The government has since reportedly banned the sale offorward options to prevent a self-ful lling crisis.

Similarly, Chinas delinking of its currency from the US dollar, and toward abroader basket of currencies, has driven uncertainty and speculation about furtherdepreciation. At one point earlier this month, the o shore yuan was trading at arecord discount to the onshore rate, before aggressive government intervention,

including wild swings in o shore yuan borrowing rates, quashed any speculation(see Fig. 3).

Chinas moves have had a notable impact on Hong Kong, too, where USDHKD hitan eight-year high, albeit remaining within the Hong Kong Monetary Authoritystrading band.

The imbalance between oilsupply and demand will be akey metric for investors towatch.

Currency pegs have come underpressure, due to worries over

China and the falling oil price.

The Saudi currency has beenone target of speculativeselling...

...along with the Hong Kongdollar.

FEATURE

Fig. 2: Oil supply has continued to outpace demand

Source: International Energy Agency, UBS, as of 19 January 2016

Global oil statistics - in millions of barrels per day

2005 2006 2007 2008 2009 2012 2013 20142010 2011 2016201575

80

85

90

95

1002.0

1.0

0.0

1.0

2.0

3.0

3.0

Impl ie d stock cha nge (right hand sca le) Dema nd (lhs) Suppl y (lhs)

The oil glut shows noimmediate signs ofdisappearing.


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These gaps are important not because they present easy trading opportunities heavy government intervention in all markets makes bets on peg breaks highlyrisky propositions but insofar as they give us an indication of market stress andthe direction of capital ows. Until the global tension between market forces andgovernment policy is resolved, markets are likely to remain volatile.

Gap #4: European togethernessA fourth gap to monitor will be that between European states with respect to viewson integration. The migrant crisis has placed strains on relations in recent months,and, following events in Cologne over the New Year, is now a major political topicin Germany. Question marks around freedom of movement of people could leadto questions about the wider European project, creating a potential repeat of thekind of instability we saw previously around Greece.

An important barometer of this will be the UKs vote on EU membership, whichlooks increasingly likely to take place this year. Our base case remains that the pro-EU camp will prevail, but the latest polls give the campaign only a 5 percentagepoint lead, down from about 16 points in September. This data has led us to raiseour Brexit probability to 20-30%, and this will remain a crucial gap to watch inthe months ahead.

In a Brexit scenario, UK assets would clearly be in the ring line. The pound hasalready been under pressure in recent weeks due to concerns about the economy,and more weakness is probable if anxiety about a Brexit mounts. And even ifan exit were arranged on favorable terms, it would create prolonged uncertainty,darkening the investment outlook for one of Europes largest economies.

Gap #5: The Fed dot plot vs. market expectationsOnly one month on from the Feds rst rate hike in nine years, some investors arealready questioning whether the US economy could catch a cold, as China sneezesand oil markets sputter. Futures markets seem to suggest it might, pricing in fewerthan two quarter-point Fed increases this year. Our models broadly agree.

A key measure of this will bepolls in the UK ahead of a voteon continued EU membership.

Futures markets are at oddswith Fed of cials over theoutlook for rates...

FEATURE

Fig. 3: The uctuating gap between the onshore and offshore Chinesecurrency

Source: Bloomberg, UBS, as of 21 January 2016

CNY/CNH per USD Onshore-offshore spread

2011 2012 2013 2014 2015 20166.0

6.1

6.2

6.3

6.4

6.7

6.6

6.5

6.8

0.05

0.1

0

0.1

0.05

0.15

0.15

Spread (rhs) USDCNY currency rate (lhs) USDCNH currency rate (lhs)

Political gaps are also openingin Europe.

Eliminating a record currencyspread required governmentintervention.


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Charting the Feds course will be tricky, and investors will need to mind the gapbetween market expectations, and the median forecast of Federal Open MarketCommittee (FOMC) members that is calling for three to four quarter-point hikes.

Should the Fed reduce the pace of hikes toward market expectations, it would stillneed pitch-perfect communication to avoid exacerbating fears of a US slowdown. Equally, staying the course with four rate hikes would accord with US labor marketstrength, but it could fuel the re for further declines in EM, given how much manyof them depend on the dollar.

No matter how the gap closes, it wont be an unquali ed success for monetarypolicy.

Bottom lineIve looked at a (non-exhaustive) list of gaps to watch as markers of what couldgo wrong globally. When you factor in their recent volatility, global stock marketsappear especially sensitive to negative news, or the opening of any new gaps. Inlight of this, we are maintaining a neutral stance on equities in our global TAA.

But we also have to consider the possibility that things will go right, not wrong, andthat investors could stay pessimistic too long, missing a rebound. Growth scares inrecent years have passed rapidly, especially a er central banks took further policyaction. While we suggest waiting for some of the highlighted gaps to close beforetaking on too much short-term risk, investors with a longer-term time horizonmay nd the sell-o creating opportunities in selected nancial assets. Now couldbe a good time for far sighted investors to put cash to work, especially if they areunderinvested relative to their long-run equity benchmark or reference.

Tactical positioningWe are changing our positioning around the Japanese re ation trade in ourglobal TAA. We close our relative overweight to Japanese equities versus UKequities. In ation in Japan has tailed o recently, and we expect a more modestearnings growth outlook for the market this year, a er a double-digit rate ofincrease last year. Conversely, UK stocks may enjoy an earnings tailwind from a

...with FOMC membersexpecting a faster pace ofmonetary tightening.

We are neutral on equities inour tactical asset allocation.

But the sell-o also createsopportunities in selected

nancial assets.

We close our relativeoverweight to Japaneseequities versus UK equities. Weinitiate an underweight posi-tion in the yen relative to theUS dollar.

FEATURE


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weaker pound, and from an eventual bottoming out in oil prices. That said, we stillexpect to see the Bank of Japan do more to combat de ation, particularly in lightof the decline in oil prices, and so see this as a good time to initiate underweightpositions in the Japanese yen relative to the US dollar.

Overall, we hold a neutral allocation to equities, with a relative overweight in theEurozone against underweights in the UK and EM.

The sell-o in US high yield credit is opening up opportunities for longer-terminvestors, but the latest oil slide is likely to increase default rates among the mosthighly geared producers. We forecast the US high yield default rate to rise to 5.5%this year.

Finally, within European currencies we continue to believe the Norwegian kronewill rise against the euro. The markets still appear to be expecting the Norwegiancentral bank to ease further, despite core in ation at 2.9%. While Norway issu ering from the depressed oil price, its monetary policy does not need to beeased further, in our view. By contrast there is a greater chance that the EuropeanCentral Bank will have to cut rates, especially if in ation disappoints.

Mark HaefeleGlobal Chief Investment Of cerWealth Management

For comments please contact:[email protected]

FEATURE


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It remains our view that the bull marketthat began in March 2009 remains intact.However, the steep sell-o in risk assetsthat started the new year has clearly shakeninvestor con dence and prompted many toquestion that view. Against this unsettledbackdrop, the burden of proof has nowshi ed away from those who hold a nega -tive market view to those who have a moreconstructive outlook for risk assets.

So what will it take for markets to begin tostabilize and validate this more construc-

tive view? It is our view that we will likelyneed to see some combination of the fol -lowing to arrest the decline in risk assets:

clearer evidence that the deceleration inUS economic momentum in the fourthquarter was indeed temporary;

indications that commodity prices andthe US dollar have begun to stabilize;

con rmation that corporate pro tgrowth has not peaked and that thecollapse in energy sector earnings is notspilling over to remaining sectors;

commitment on the part of global poli -cymakers to remain pragmatic and re-sponsive in their decision making.

Keep in mind, of course, that these devel -opments are highly interdependent. So itsimportant to consider the dynamics as notonly uid, but linked as well. For example,the level of growth will in uence mone -tary policy which will, in turn, impact thestrength of the dollar. Likewise, energyprices and the level of the dollar will a ectcorporate pro tability, which heavily in u -ences investor sentiment.

With that in mind, consider the following:

Improvement in the economic data This most recent sell-o in risk assetsshares at least one characteristic in com-mon with each of the prior pullbacks wehave seen since the crisis: it has beenprompted in large part by a global growthscare. It is therefore necessary that upcom -ing economic data releases provide

What it will takevalidation that the global economic expan -sion remains intact and that the weaknessin the fourth quarter represents just an -other episodic so patch. Of particularinterest will be evidence that consumers inthe US remain fully engaged, signs that thenormalization of credit conditions in theEurozone has created a more durable ex -pansion, and validation that growth inChina is not collapsing under the weight ofboth heavy debt burdens and a series ofpoorly planned policy moves.

It is our view that upcoming data releaseswill con rm that the economic expansionendures uneven and substandard thoughit may be. There is a whole host of datathat can be scrutinized to help gauge thecurrent pace of economic activity PMIs,payrolls, industrial production, and retailsales among them. Keep in mind, however,that markets typically react not only to theeconomic data releases themselves, butalso by how far they deviate from consen -sus expectations. So a helpful way for mar -ket participants to gain con rmation isthrough a rise in the economic surprise in-dicator (see Fig. 1). Given the most recentdowngrade of growth expectations, thebar is now set pretty low. We will thereforelook for an upswing in the economic sur -prise indicator as a signal that recessionaryfears are overdone.

Stabilization in commodity prices andthe dollar The ongoing slide in oil pricesand strengthening of the dollar are espe -cially burdensome for commodity-produc -ing emerging market economies with heavyexternal debt burdens (i.e., dollar-denomi -nated debt). But the decline in crude is alsoadding to the de ationary headwinds fordeveloped market countries as well.Although falling oil prices are positive forenergy importers such as Japan and theEurozone in the long term, for now at leastthe focus is clearly centered upon nancialmarket stress.

Given the heavy supply overhang, crudeprices are unlikely to recover in the very

Mike Ryan, CFAChief Investment Strategist,Wealth Management Americas

IN CONTEXT


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near term. However, with most of thesesupply shocks sustained NorthAmerican production, breakdown of disci -pline within OPEC, reintroduction of

Iranian supply being already well known,further oil price declines from here shouldbe more limited. Meanwhile, the combina-tion of so er growth and increased marketvolatility reduces the prospects for aggres -sive Fed rate hikes. This, in turn, will helptake some of the edge o the dollars ap -preciation. The combination of more sta -ble energy prices and a steadier dollarshould help ease the stress on emergingmarkets and so en de ationary forces inthe developed world.

Continued corporate pro t growth The stronger dollar and lower oil priceshave also taken a heavy toll on US corpo-rate pro tability. Overall earnings growthstalled in 2015, with the energy sectorposting year-over-year declines of 60%and companies with signi cant currencyexposure representing another 3% dragon pro ts. Keep in mind that with USstocks trading at valuations close to histori-cal norms and the Fed in the early stagesof policy normalization, further equitymarket gains from here will depend mostlyupon the level of corporate pro ts.

With the fourth-quarter earnings seasonnow upon us, we should begin to get a bitmore clarity on the all-important pro t pic -ture. As has been the case for each of thethree previous quarters last year, analysts

have been active in cutting their earningsforecasts in the weeks leading up to thereporting season. As such, earnings in ag-gregate should handily beat currently de-

pressed forecasts. More important, earn -ings outside of the energy sector are likelyto have risen between 4% and 6% duringthe quarter and 7% for the full year (seeFig. 2). This should help ease concerns overan earnings recession and help stabilizethe market.

Pragmatic policy response The combi -nation of Chinas move to devalue its cur -rency in August and the decision by theFed to raise rates in December served tounsettle markets accustomed to a more

benign policy backdrop. Although Chinasmove toward greater currency exibilitywas prompted more by e orts to have theyuan added to the basket of central bankreserve currencies than to engage in acompetitive devaluation, the impact onemerging markets was immediate andharsh. Meanwhile, the Feds decision toraise rates despite a near complete ab-sence of price pressures only added to theoverall tightening of nancial conditions.

Following a second surprise devaluation inJanuary that contributed to the New Yearsell-o , China has gone to great lengths todefend the yuan. This suggests thatChinese of cials will be more cautious anddeliberate in allowing for further currencydepreciation. Likewise, recent commentsby senior Fed of cials indicate that

IN CONTEXT

weakness in the economy and volatility innancial markets could materially in uence

the Feds decision-making. So in the ab-sence of a reacceleration of growth and

stabilization of risk assets, the odds of aFed rate hike in March have diminished.Chances for the European Central Bank toboost the size of its quantitative easing inMarch also seem to be rising given com-ments made during Mario Draghis pressconference. These more pragmatic ap -proaches should ease concerns over a sig-ni cant policy misstep.

Burden of proofIt remains our view that markets are cur-rently oversold and that the risks of an

economic recession, policy mistake, andearnings collapse are greatly overstated.However, sentiment remains poor and theburden of proof now lies with the bullsrather than the bears. This suggests thatmarkets are apt to remain volatile, and anyrecovery in risk assets will be limited in thenear term until we get further clarity onthe macro, policy, commodity, currency,and pro t front. We believe this will beginto materialize as the year progresses, butinvestors may need to be patient.

In the meantime, we recommend that cli-ents refrain from actively selling out of eq -uity positions, maintain normal levels ofrisk in their portfolios, and, assuming asuf ciently long time horizon, considerputting large cash positions to work.


UBS US growth surprise index (rhs)S&P 500 (lhs)

500700

19001700150013001100

900

2100

2300

5070

19017015013011090

210

230

2006 2007 2008 2009 2010 2014201320122011 2015

Fig. 1: A rise in the economic surprise indicator wouldprovide a signal that recessionary fears are doneUBS US growth surprise index and the S&P 500

Source: FactSet, UBS, as of 20 January 2016

100

140

130

120

110

150

Dec-15Dec-14Dec-13Dec-12Dec-11Dec-10

Fig. 2: Earnings trends ex-energy remain healthyS&P 500 and S&P 500 ex-Energy trailing 12-months earnings, indexed

S&P 500 ex-energy

S&P 500


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Preferredinvestmentviews

Most preferred Least preferred

Equities US small-caps UK

Eurozone* Emerging markets*


North American energy independence

US technology

Cancer therapeutics


Bonds US investment grade Government bonds*

Beyond benchmarks

Currencies NOK EUR

USD JPY

Alternative investments

Recent upgrades Recent downgrades


As of 21 January 2016*Change made on 7 January 2016

Note: For more information, see House View Update: Markets do not yet understand Chinese reduce equities to neutral, 7 January 2016.


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EconomyChina has once again taken center stage in early 2016 as its governments currencymanagement raised uncertainty about the future path and degree of renminbi de -

preciation among global investors. While the risk of global contagion has risen, ourbase case remains for China avoiding an economic hard landing. More impor -tantly, we expect continued growth in the US and Eurozone, balancing the generalgrowth weakness of emerging markets (EM). The Federal Reserve kicked o therate-hiking cycle on 16 December. This occurred against the backdrop of a robustlabor market, as highlighted by strong new job creation in December. Still, this hik-ing cycle will progress only very gradually due to low in ation and the prevalentweakness in parts of the economy, namely manufacturing. Meanwhile, Eurozonegrowth continues apace. Latest leading indicators showed a further mild improve -ment in the outlook. Still, at persistently low in ation levels, more ECB easing is be -coming more likely.

EquitiesAgainst a backdrop of volatile markets susceptible to otherwise manageable neg -ative shocks as well as the uncertainty over the Chinese governments currencymanagement intentions, we recommend a neutral position in global equities inour tactical asset allocation. However, we believe Eurozone companies are cur-rently best positioned to bene t from continued global demand. Low re nancingcosts and a supportive currency e ect should additionally support rising pro t -ability. Therefore, we prefer Eurozone over UK and EM equities in a regional con -text. UK equities have a large exposure to the energy and the materials sectors,where the latest rout in commodity prices weighs, while EM equities earningsand pro t margins continue to deteriorate against a backdrop of weak domesticfundamentals.

Fixed incomeWe maintain an overweight in US investment grade (IG) bonds. Spreads havewidened amid the market turmoil but we do not believe there is a high probabil-ity of a US recession or a wider crisis in higher-quality corporate credit beyondthe energy sector. At an average yield to maturity of 3.6% they o er an appeal -ing yield pickup over government bonds. From current low yield levels, US gov-ernment bonds are unlikely to deliver attractive total returns over the next sixmonths. We are underweight the asset class while acknowledging that it contin-ues to play a crucial role as portfolio diversi er, stabilizing portfolio returns whenrisk assets sell o .

Foreign exchangeWe maintain our favorable view on the Norwegian krone compared to the euro.A stabilizing Norwegian economy should lead to monetary policy divergence andsupport a rising yield di erential in favor of the krone. We are adding an under -weight position in the Japanese yen against the US dollar. The yen strengthenedamid the recent global risk-o sentiment, thereby making it even more dif cultfor the Bank of Japan to reach its in ation target. The BoJ is hence expected toat least maintain, if not expand, its very easy monetary policy stance. The Fed,on the other hand, has embarked on a path of gradual policy tightening. For EU -RUSD, we maintain our 6- and 12-month forecasts of 1.08 and 1.10, respectively.

The S&P 500, as of this writing, hasfallen 9% this month, in line with

other major developed equity mar-kets, due to acute concerns overglobal growth prospects amid tum-bling commodity prices. US eco-nomic data has been mixed-to-dis -appointing to begin the year. TheISM manufacturing index fell to48.2 and vehicle sales disappointed.On the positive side, nonfarm pay -rolls continued to increase at a ro-bust pace with 292,000 jobs addedin December.

European Central Bank PresidentMario Draghi hinted at further stim -ulus on 21 January as Eurozone in-

ation still remains substantially be -low target. Eurozone economic datahas been better than expected, andthe latest Eurozone composite PMIreport showed an increase from 54to 54.3.

Onshore Chinese equity marketshave fallen nearly 20% so far inJanuary on increased concerns overfurther currency depreciation andcontinued slowing manufacturinggrowth. To begin the year, ChinasA-share market was shut down fortrading several times, a er triggeringthe 7% circuit breaker for intra-daylosses. The circuit breaker was aban-doned several days into the year.

Oil prices continued their steep de-scent. Brent crude oil fell below theUSD 28/bbl threshold on 20 January,representing a 26% decline sincethe end of last year. Sentiment inthe oil markets has remained over-whelmingly negative, and the sellingmomentum that began the year hascontinued unabated with no positivecatalysts in the near term. Fears overthe health of the Chinese economyhave also created demand concerns.

Month inReview

At a Glance


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GlobaleconomicoutlookBrian Rose, PhD, US Economist

Recent US economic data has been mostly dis-appointing. While the labor market continues toimprove, consumer spending has been so , andthe manufacturing sector is struggling. The Euro -zone has been a relative bright spot, but Japan istreading water. Emerging market economies havebeen relatively weak. China continues to struggle,although government support measures are help-ing to stabilize the economy. In ation is subduedand monetary policy is extremely accommodativein most countries.

Robust growthin USBrian Rose, PhDUS Economist

House viewProbability: 70%

We expect robust US real GDP growth overthe next 12 months. Improved US house -hold and business fundamentals shouldsupport private domestic demand growth,though with a moderate drag due to astrong USD. Against a backdrop of fallingunemployment and faster wage growth,the Fed started to raise rates in Decem-ber. We expect the pace of rate hikes to be

much more gradual than in previous tight-ening cycles. Housing starts should con-tinue to increase and prices should remainon a modest upward trend. The negativeimpact of lower oil prices on energy sector

xed investment has been a signi cant dragon growth, particularly in the manufactur -ing sector, which remains stagnant.

Positive scenarioProbability: 15%

Strong expansion

US real GDP growth rises signi cantly above3%, propelled by an expansive monetarypolicy, improved business and consumercon dence, strong housing investment, andsubsiding risks overseas. The Fed raises pol-icy rates signi cantly more than marketsanticipate.

Negative scenarioProbability: 15%

Growth recessionUS growth stumbles. Consumers save

rather than spend the windfall from lowerenergy prices, while businesses lack thecon dence to hire workers and boost in -vestment spending. The Fed stays on holdin 2016.

KEY FINANCIAL MARKET DRIVERS

Real GDP growth in % In ation in %2015 2016F 2017F 2015 2016F 2017F

US 2.5 2.8 2.5 0.1 1.5 2.7Canada 1.1 2.2 2.5 1.5 1.9 2.0Brazil -3.6 -2.8 0.7 10.6 6.4 4.8Japan 0.6 1.3 0.7 0.9 1.0 1.2

Australia 2.2 2.6 2.7 1.5 2.2 2.4China 6.9 6.2 5.8 1.5 1.5 1.2India 7.1 7.6 7.8 5.0 4.6 4.0Eurozone 1.5 1.8 1.8 0.0 0.7 1.7UK 2.4 2.4 2.3 0.1 1.1 1.9Switzerland 1.0 1.4 1.8 -1.1 -0.4 0.3Russia -3.7 -1.2 1.5 15.5 8.6 5.7World 3.1 3.3 3.4 3.5 3.8 3.4

Source: Reuters EcoWin, IMF, UBS, as of 19 January 2016Note: In developing the CIO economic forecasts, CIO economists worked in collaboration witheconomists employed by UBS Investment Research. Forecasts and estimates are current only asof the date of this publication, and may change without notice.

Global growth in 2016 expected to be 3.3%


15/42

27 January 2016FOMC policy decisionThe Fed raised rates in December,and, in our view, is unlikely to takeany further action at this meeting.With no news conference sched -uled, the wording of the statementcould have a big impact on markets.

29 January 2016US 4Q15 GDPRecent US economic data has sur-prised mainly on the downside, andit appears that GDP growth slowedsigni cantly in 4Q15. Consumerspending in particular was weakerthan we expected going into the

quarter.

29 January 20164Q15 Employment Cost Index(ECI)This report will be watched closelyfor any signs that a shortage of la -bor is putting upward pressure onwages. We consider the ECI to bea better measure of wages thanhourly earnings from the monthlylabor report.

1 February 2016PCE price index for DecemberThe Personal Consumption Ex -penditures price index is the Fedspreferred measure of in ation andhas been running well below their2% target. Any further slowdownwould make it dif cult for the Fedto hike rates.

1 February 2016ISM Manufacturing for JanuaryThe ISM Manufacturing PMIslumped to 48.2 in January, its low -est reading since 2009 and the sixthstraight monthly decline. Any signof stabilization in the January reportwould be welcomed.

Key datesImprovingEurozonegrowthRicardo Garcia-SchildknechtEconomist


The Eurozone economy is likely to im-prove further in the coming quarters asthe monetary impulse reaches its peak,with easy nancing conditions support -ing a capital expenditure boost. The re -newed fall in oil prices means downsiderisks to in ation, in particular furtherweakness in the rst half of 2016. Theprobability of further ECB easing aroundthe second quarter has increased sub-stantially, despite an accelerating Euro-zone economy and the expected ratehikes in the US.


Better-than-expected growthOil prices and the euro decline morethan expected, with loan demand andthe economy recovering faster than en -visaged. France follows a credible re -form path and speeds up scal consoli -dation. Political risks fade further.


De ation spiralThe Eurozone slips into a de ation spiraldue to a shock, such as Greece leavingthe Eurozone, a sharp escalation in theUkraine con ict, or China su ering a se -vere economic downturn.

Resolving over-capacityChih-Chieh Chen; Yifan HuAnalysts


We forecast Chinas GDP to grow by6.2% in 2016. As China transforms, themanufacturing PMI is likely to remainin contraction territory, while the ser-vices PMI is expected to stay above 50.Investment will continue to decelerate,dragged down by traditional manufac -turing and real estate; consumption isexpected to grow mildly, contributing

56% to GDP growth in 2016 from 54%in 2015. CPI in ation will rise mildly to2% in 2016, mainly due to rising porkprices and a low base for comparison.PPI in ation will rebound slightly, butremain negative.


Growth accelerationAnnual growth is 6.8% year-over-yearas a result of more substantial policy

stimulus measures from the governmentor a strong pickup in external demand.


Sharp economic downturnA hard landing materializes, which wede ne as sub-5% real GDP growth formore than two quarters. The economyweakens abruptly due to a sharperdownturn in property investment andwidespread credit events.



16/42


ASSET CLASSES OVERVIEW

Against a backdrop of volatile markets susceptible to otherwise manageable negativeshocks, we recommend a neutral position in global equities. However, we believe Eurozonecompanies are currently best positioned to bene t from continued global demand. Lowre nancing costs and a supportive currency e ect should support rising pro tability. Weprefer Eurozone over emerging market equities, whose earnings and pro t margins con -tinue to deteriorate against a backdrop of weak domestic fundamentals.

Equities

Eurozone overweight

We are overweight Eurozone equities. Corporate earningsgrowth is improving, supported by rising margins and steadytop-line growth. Ongoing monetary easing is supportive ofprospects for continued economic recovery. Leading eco -nomic indicators are showing more upside in economic activityahead, bene ting companies revenue generation prospects.Our most preferred sectors are nancials, energy, healthcare,and technology.

UK underweight

We are underweight UK equities. Earnings dynamics remainweaker than in other countries, especially with the renewedsharp fall in commodity prices. In the UK, the energy sectorhas a 12% weighting, and the materials sector, 5%. The recentweakening of the pound is helpful to FTSE 100 earnings, buthas not yet created a strong currency tailwind versus last year.Due to its defensive sector stance, the UK will likely bene t less

should the economic outlook improve.

Emerging markets underweight

We are underweight EM equities in our global portfolio. Theconsensus expectation is for EM earnings to grow 8-9% overthe next 12 months. We are more cautious, however, and ex -pect about 2-6% growth. The devaluation of the Chineseyuan relative to the US dollar has created new uncertainties.We forecast trailing P/E valuations will stay around current lev -els. We prefer China and Turkey to Mexico, Thailand, Taiwan,and South Africa.

EURO STOXX (index points, current: 305) Six-month target

House view 325 Positive scenario 385 Negative scenario 270

FTSE 100 (index points, current: 5,674) Six-month target

House view 5,925 Positive scenario 6,650 Negative scenario 5,000

MSCI EM (index points, current: 693) Six-month target


Japan neutral

We are neutral on Japanese equities. While Japanese companiesare seeing solid earnings growth, the tailwind of a weak yen isfading. The recent rise in investors risk aversion is harming thecyclical-oriented Japanese equity index. Uncertainty about thegrowth outlook of the Chinese economy and more mixed dataout of Japan weigh on the market. Company share buybacks, inadherence to Japans corporate governance code, add support.

We expect Topix trailing P/E to expand to 13.8x in the next sixmonths from the current level of around 13.5x.

TOPIX (index point, current: 1,339) Six-month target


Jeremy Zirin, CFA; Brian Nick, CAIA; David Le owitz , CFA; Manish Bangard, CFA; Markus Irngartinger, PhD, CFA

Note: Current values as of 20 January 2016


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US equities styleLarge-cap growth was one of the few market segments todeliver solid returns in 2015. The Russell 1000 Growth Indexrose 5.7% last year, compared to the 3.8% decline in the Rus -sell 1000 Value index. Many of the factors that led to growthoutperformance are still in place reasonable valuations forgrowth and strong prospects for the tech sector. But a reboundin oil prices and/or interest rates should bene t value. We rec -ommend a balanced allocation between growth and value.

US equities overview neutral

The S&P 500 barely eked out a positive total return in 2015,rising by just 1.4%, and 2016 is o to an even more challeng -ing start. Last year, at market returns for US equities largelymirrored the at earnings growth delivered by S&P 500 com -panies. We have reduced our 2016 S&P 500 EPS estimate toUSD 126 from USD 130, but this still represents mid-single-

digit growth over 2015 levels. Most sectors outside of energyshould still see earnings growth in 2016, and the earnings dragfrom the collapse in oil prices and a strong dollar should beless acute than in 2015. Our six-month price target is 2,025.

US sectorsCyclical sectors appear inexpensive relative to defensive sec -tors, and we have a moderate pro-cyclical tilt in our US sec-tor strategy. Technology remains our largest overweight, andeven a er outperforming the S&P 500 by about 5% last year,the sector trades at discount to the market at under 15 times

forward one-year earnings. We have a moderate overweightin healthcare and energy. Energy continues to slump, but wesee value at current depressed valuations, particularly for pa -tient investors. This month, we downgraded industrials toneutral and trimmed our telecom underweight.

US equities sizeSmall-caps have lagged this year. Mixed economic data, fearsof a global slowdown, and rising corporate credit spreads haveall contributed to weak performance. However, with valuationsrelative to large-caps at ve-year lows, the prospects for small-caps to outperform appear bright if markets recover as we ex -pect. Small-caps have weaker credit ratings; therefore, lowerhigh yield credit spreads will be vital in order for small-caps tostage a comeback.

Source: FactSet, UBS, as of 20 January 2016

90

105

102

99

96

93

108

111

9

5

6

7

8

4

3

2012 2015 20162011 20142010

Small-caps should rebound as high-yield stress diminishesSmall-cap vs. large-cap performance and high-yield spreads

2013

High yield spread (rhs, inverted)

Small vs. large (lhs)

UBS 6-mth

forecast

Source: FactSet, UBS, as of 20 January 2016Note: 2015 and 2016 S&P 500 EPS are UBS CIO estimates.

100

125

120

115

110

105

130

Energy Energy S&P 5002016 EPS

Nonenergy

Nonenergy

S&P 5002014 EPS

Non-energy growth to be more visible in 2016Components of change in S&P 500 earnings per share (EPS), in USD

S&P 5002015 EPS

Positive contributionNegative contribution

Base

US equitiesUS and global equity markets have su ered sharp declines at the start of 2016. Similar to thelate August 2015 market sell-o , fears of a disorderly slowdown in China and other emerg -ing markets appear to be the trigger. Additionally, the further slump in oil prices, continuedweak global manufacturing, and uncertainty over the Fed have further stoked domesticrecessionary fears. These concerns may linger in the near term, but we expect both the USeconomy and S&P 500 pro ts to prove resilient.

S&P 500 (index points, current: 1,859) Six-month target

House view 2,025 Positive scenario 2,250 Negative scenario 1,700

Note: Current value as of 20 January 2016


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We expect the 10-year US Treasury yield to move modestly higher as the economy contin -ues to grow, the labor market continues to improve, and the Federal Reserve responds bycontinuing to gradually raise the policy rate. Some weakness persists in the manufacturingsector, although there are no signs of signi cant negative spillover to the rest of the econ -omy. Both the service sector and consumer spending are improving, while in ation remainspressured by the strong dollar and declining commodity prices.

Bonds

Government bonds underweight

Treasury yields have declined more than 30bps in the rst twoweeks of January as volatility has increased investor appetitefor the safe haven of US government securities. With globaluncertainties increasing, yields have continued to decline,even when faced with stronger job numbers. We maintain our12-month yield forecast at 2.50% on 10-year Treasuries, asyields will gradually rise once short-term volatility subsides.

Emerging market bonds neutral

We maintain a neutral allocation to emerging market sover-eign and corporate bonds denominated in USD in the contextof a globally diversi ed portfolio. Credit spreads have furtherwidened on fears about China, commodities, and weak USeconomic data. Concerns about an unstable China and a slow-

down in the US seem overstated, in our view, and we expectfavorable technicals to support valuations. However, slowergrowth in China will keep hurting EM currencies, ratings out-looks remain skewed toward downgrades, and default ratesare likely to increase.

US investment grade corporate bonds overweight

Although investment grade (IG) corporate bond spreadsmoved wider, their returns have bene ted from the declinein US Treasury yields with IG bonds up 0.6% year-to-date. IGbonds o er an attractive risk/reward pro le, with spreads attheir widest since 2012. Spreads will likely narrow if risk assetsstabilize, while IG bonds long duration would help during fur -ther market weakness. We recommend 5- to 10-year maturi-ties. Within nancials, we prefer higher-rated issuers subordi -nated bonds, and within non- nancials, we favor select issuersthat are deleveraging.

US 10-YEAR YIELD (Current: 1.98%) Six-month target

House view 2.5% Positive scenario 2.93.3% Negative scenario 1.72.1%

EMBIG div / CEMBI div SPREAD (Current: 485bps / 478bps )

Six-month target

House view 380bps / 400bps Positive scenario 300bps / 320bps Negative scenario 520bps / 540bps

US IG SPREAD (Current: 190bps* ) Six-month target

House view 125bps

Positive scenario 100bps Negative scenario 250bps

US high yield corporate bonds neutral

At 827bps, high yield spreads are currently pricing in defaultrates of over 8%, above our forecast of 5% in the next 12months. We expect HY spreads to tighten from their currentlevels and hold a neutral allocation to HY. At a yield over 9%,the coupon income will be a signi cant source of HYs total re -turn, even with defaults expected to reduce income by 2-3%.Persistently low oil prices add to uncertainty, although risks tothe US energy sector are re ected in distressed pricing, in ourview. We generally favor the consumer goods and services sec -tor over the energy and metals sectors.

USD HY SPREAD (Current: 827bps* ) Six-month target

House view 590bps Positive scenario 450bps Negative scenario 1,100bps

Leslie Falconio; Kathleen McNamara, CFA, CFP; Barry McAlinden, CFA; Philipp Schoettler; Frank Sileo

*Data based on capital BoAML High Yield indexes

*Data based on Barclays Corporate Aggregate Index



19/42


Preferred securitiesPreferreds returned 8.5% in 2015, outperforming other majorsectors that struggled with supply issues and credit concerns.Spread compression acted as a shock absorber to periodicrate spikes cushioning the impact and driving returns higher.

Returns this year could be more challenged, given the likeli-hood of higher sustained rates and greater volatility, while cur -rent spread levels leave limited prospects for further compres -sion. We maintain our neutral view. Current option-adjustedspread is: 120bps (160bps last month) based on the BAMLCore Plus Fixed Rate Preferred Index.

Municipal bonds neutral

The tailwinds that were supportive of municipal bond prices inthe last few months of 2015 have now extended into the newyear. Munis have posted a positive total return of 1.0% thusfar in 2016. Muni yields have fallen, but at a slower pace thanwitnessed in the US Treasury bond market. As the year pro-gresses, refunding transactions are likely to increase based onlow interest rates and a atter yield curve. As a result, a pickupin supply is apt to weaken the strong technicals now in place.Current AAA 10-year muni-to-Treasury yield ratio: 86.0% (lastmonth: 84.4%).

Treasury in ation-protected securities (TIPS)TIPS break-even in ation (BEI) has been falling with the declinein oil prices. This factor, combined with low wage in ation, hastemporarily dragged down TIPS performance. However, even

with this strong adversity, TIPS BEI has not reached the levelsseen last fall with much lower oil prices. We remain holdersof 5-year TIPS and believe the outperformance will once againresume when volatility declines. Current 10-year breakeven in-

ation rate of 1.37% (1.58% last month).

Non-US developed xed income underweight

Non-US bond yields moved mostly lower over the past month,although by slightly less than in the US. The dollar gainedmodestly against most other currencies as the Feds Decem-ber rate hike provided support. As a result, returns on non-USbonds were positive, but lower than on US bonds. We expectyields to gradually rise and the dollar to strengthen further inthe near term, producing poor returns on non-US developed

bonds for dollar-based investors. We therefore recommend anunderweight position on the asset class.

Additional US taxable xed income (TFI) segments

Credit sector spreads have widened substantially from theJune 2014 tights due to the continued decline in oil prices

Source: BAML, UBS as of 20 January 2016

HY and IG corporate spreads (in bps) vs. WTI oil price (USD)

600

500

400

300

200

700

800

10585654525

125

185165145

205

HY spread (rhs) IG spread (lhs)Oil price (lhs)

Sep-15Jun-15Mar-15Dec-14Sep-14Jun-14 Dec-15

CIO WMR interest rate forecastsIn %

Americas 21 Jan-16 3 months 6 months 12 months

USD 3M Libor0.6 1.2 1.5 2.0

USD 2Y Treas. 0.8 1.4 1.5 1.8

USD 5Y Treas. 1.4 1.9 2.0 2.1

USD 10Y Treas. 2.0 2.4 2.5 2.5

USD 30Y Treas. 2.8 3.1 3.2 3.2


Mortgage-backed securities (MBS)MBS current coupon performance has been very stable, giventhe increase in volatility we have witnessed year-to-date. Cur-rently, the spread is 104bps over the 5-year and 10-year Trea-

sury curve. We removed our overweight in MBS last Novem-ber, and went back to a neutral allocation. Given the lack ofcredit exposure within MBS, we feel the asset class will per -form well in 2016, but underlying uncertainty remains for theFeds balance sheet. Current spread is 104 bps to the 5-yearand 10-year Treasury blend (versus 104 bps last month).

Agency bondsAgency debt valuations continue to look rich to us versusthe traditional alternatives. However, we cannot dispute thatagency debt has performed well as risk assets falter. The

BAML Agency Index has returned over 1.19%. This return isone of the top-performing within the xed income asset classyear-to-date. However, we maintain our view that MBS is thebetter alternative. Current spread is 20bps to the 5-year Trea-sury (versus 15bps last month).



20/42



Most commodity markets are oversupplied and in dire need of stronger demand. Theglobal economy should accelerate only to 3.3% in 2016, from 3.1% in 2015, leaving thedemand prospects for commodities uncertain. More importantly, most of the globalgrowth acceleration is likely to come from the developed world, while Asia (China),which holds the lions share of demand for industrial metal and bulk commodities, is setto slow further.

Commodities and other asset classes

Commodities neutral

Precious metals Following the December li o , we expectfour 25bps hikes by the US Federal Reserve in 2016, and thefed funds rate is projected to reach 1.25-1.50% at the endof2016. Gold prices should therefore weaken further in theshort run, followed by a recovery in six to 12 months. In theshort term, this could shi gold prices to new multi-year lows,potentially dipping below USD 1,000/oz as we approach theMarch Fed meeting; so gold is still an unattractive story.

GOLD (Current USD 1,101/oz) Six-month target

House view USD 1,050/oz Positive scenario USD 1,300/oz

Negative scenario USD 900/oz

Crude oil Oil prices have continued sliding on renewed eco-nomic concerns related to emerging Asia. With a current oilmarket surplus of 1-1.5 mbpd (world oil consumption closeto 96 mbpd), rising inventories remain a key price burden forcrude oil in the short term. The oil markets high vulnerabil-ity to even lower prices, whereby production is forced to shutdown, makes the near-term price bottom dif cult to call. Onlyextremes seem to discourage production and motivate thecapital market to pull out.

BRENT (Current: USD 27.9/bbl ) Six-month target

House view USD 45/bbl Positive scenario USD 70/bbl Negative scenario USD 20/bbl

Dominic Schnider, CFA, CAIA; Giovanni Staunovo; Thomas Veraguth; Wayne Gordon

Base metals The outlook for base metal prices overall re -mains poor. Almost all the metal markets are in surplus, anddemand concerns remain elevated in 1H16. Moreover, wehavent seen a material supply response yet to turn price-pos-itive in a sustainable manner. We see the most downside risks

Agriculture Grain prices should remain range-bound as fa -vorable weather in Brazil should boost the prospects of addingmore production to the already high global inventories. The soy-beans/corn price ratio of above 2.4 suggests that US farmers willagain favor soybean planting over corn in the upcoming springplanting season. This supports our relative preference of cornversus soybeans. Wheat supplies remain ample, capping theprice upside potential. That said, prospects of a La Nia eventare a longer-term bullish risk to our view. In so s, we see down -

side risk for sugar prices as larger inventories and a weaker Bra -zilian currency remain a price burden in the short term.

in copper and lead. We expect copper prices to move to USD4,000/mt, despite the bearish positioning in the futures mar -

ket. Nickel and aluminum prices are likely to see better pricesupport from a production cost perspective.

Other asset classesListed real estate Listed real estate has rebounded since itsSeptember 2015 low, and has outperformed global equities.Yet, it failed to surpass its peak in March 2015. Nevertheless,stocks are currently trading at expensive levels (versus histori -cal levels). Elevated interest rate volatility and slightly wideningcredit spreads may be the reason. While property market funda -mentals remain supportive, we anticipate growing uncertainties

among investors about the sustainability of the current up-cyclethat began in 2009.

FTSE EPRA/ NAREIT DevelopedTR USD (Current: 3,899 ) Six-month target

House view USD 4,300 Positive scenario USD 4,500 Negative scenario USD 3,700



21/42


USD overweight Despite weaker US business sentiment, the la-

bor market has continued to recover quite strongly, paving theway for more Fed rate hikes this year. We therefore expect theUSD to retain its strength. However, we think there is a limitto further dollar appreciation. An even stronger USD wouldnegatively impact US in ation and the international competi -tiveness of US companies.

EUR underweight The ECB eased policy further in December,

but still managed to disappoint the market. Recent Eurozoneeconomic activity has surprised positively, while in ationremains extremely subdued. The ECB signaled at its Januarymeeting that it would reevaluate its policy in March, which inour estimation raises the probability of further easing mea -sures and introduces more downside risk for the euro againstUSD and other currencies in the near term.

GBP neutral The Bank of England (BoE), once thought to be

right on the heels of the Fed in the race to tighten monetarypolicy rst, has become far more dovish in its recent meetings.Partly as a result, GBPUSD has fallen to levels not seen since the

nancial crisis. GBP is likely to struggle unless and until the BoEadopts a more restrictive policy stance, but we expect this tohappen and to contribute to GBP strength as the year wears on.

CHF neutral EURCHF has established a 1.05-1.10 range, wherewe expect it to stay. The Swiss franc has little room to weakenversus the euro as long as the ECB continues with quantita-tive easing, while the Swiss National Bank will prevent it fromstrengthening.

Foreign exchangeBrian Nick; Thomas Flury

The dollar has bene ted from global risk aversion in January, appreciating against everymajor currency save the Japanese yen. With oil prices expected to rebound, we believe thistrend may be nearing its end, although the more advanced stage of monetary policy in theUS should support USD even at these lo y levels. We now prefer USD to JPY, with the Fedand the Bank of Japan (BoJ) headed in opposite directions and risk aversion likely to wane.

UBS CIO FX forecasts21 Jan 2016 3M 6M 12M PPP*

EURUSD 1.091 1.05 1.08 1.10 1.26USDJPY 116.6 127 127 124 77USDCAD 1.452 1.44 1.38 1.34 1.20

AUDUSD 0.688 0.68 0.68 0.65 0.70

GBPUSD 1.417 1.48 1.55 1.58 1.63

NZDUSD 0.643 0.60 0.60 0.60 0.58USDCHF 1.002 1.01 1.00 1.00 0.99EURCHF 1.094 1.06 1.08 1.10 1.25GBPCHF 1.421 1.49 1.55 1.58 1.62EURJPY 127.2 133 137 136 97EURGBP 0.770 0.71 0.70 0.70 0.77EURSEK 9.364 9.40 9.40 9.00 8.94EURNOK 9.702 9.00 8.60 8.50 9.70

Source: Thomson Reuters, UBS, as of 21 January 2016Note: Past performance is not an indication of future returns.*PPP = Purchasing Power Parity

JPY underweight The risks are skewed to a weaker yen against

the US dollar. The BoJ remains accommodative in order toreach its in ation target. JPY strength may begin to a ectcompany earnings, according to a recent survey. Chinesedemand is weaker, which should stir the BoJ to act. Short yenpositions were unwound in recent months, and market expec -tations for US rate hikes are very conservative.

Other developed market currencies overweight Commodity currencies continue to be hurt by

plummeting oil prices. Should our bullish oil forecast provecorrect, the Canadian dollar in particular has lots of room toappreciate against USD. Within Europe, we prefer the Nor -wegian krone to the euro for similar reasons. The Australianand New Zealand dollars continue to come under stress with aslowing China demanding fewer commodity imports. Their in -terest rates have also fallen relative to those in the US.

ASSET CLASSES OVERVI


22/42


IN FOCUS

Jeremy Zirin, CFAChief US Equity Strategist

We are in the midst of the worst pe -riod for global equity markets since2011. Concerns are centered on a slow-ing China and a sharp decline in energyprices to levels not seen in over a decade.While voices calling this the beginningof a worldwide recession have become

louder and more numerous, we see fewtruly threatening signs that things areheaded in that direction.

China and energy creating ripplesWhile most US investors were still sleep-ing on the rst business day of the year,China was already making worrisomeheadlines. A plummeting onshore Chi-nese equity market and unusually highforeign exchange-rate volatility echo lastsummers market correction. But with oilprices and global manufacturing activityboth at fresh lows, equity markets havenow fallen through their 2015 lows.

To what do we attribute these marketfears? First, theres an impression thata decelerating China may trigger reces-sions in Asia and beyond. Second, thereare worries that the fall in WTI crude oilto under USD 27 per barrel from USD107 in 2014 is due as much to slump-ing global growth as it is to oversupply.Furthermore, the oil price collapse hasalready led to a wave of energy sectordebt defaults and higher loan-loss pro -visions from banks, stoking fears of acredit crunch. Pessimism about energyhas bled signi cantly into the broadermarket. Fig. 1 shows that excluding theglobal nancial crisis and its a ermath,the S&P 500 Index and the BloombergCommodity Index have never been morehighly correlated than they have beenover the past year.

but no tsunamiBecause the last two US recessions wereassociated with large buildups and rapidcontractions in single sectors (technol-ogy in 2000; nancials in 2007), its logi -cal to ask whether the collapsing energysector may lead to a wider contractionin growth. But while a halt in energy-re-lated investment has clearly impacted thebroader US economy, we believe the USand most other large developed econo-mies will ultimately bene t from lowerenergy prices. Our colleagues on the USEconomics team in UBS Investment Re-search have highlighted that the savingsto consumers from lower gasoline pricesin 2015 outweighed the losses fromlower energy investment by USD 44 bil-lion, or 0.2% of GDP (see Fig. 2). Even ifsome of that windfall is saved rather thanimmediately spent, stronger householdbalance sheets will make consumers moreresilient down the road. We certainlycould not say the same for the damagingresidual impact of the bursting technol -ogy bubble in 2000 or the global nancialcrisis in 2007-08.

Simmering risks

unlikely to boil over

Brian Nick, CAIAHead of Tactical Asset Allocation US

Video featureClick play button to watch
http://www.ubspodcast.ch/us/wmr/podcast/en/topofthemorning/160122-Simmering_risks_unlikely_to_boil_over_Jeremy_Zirin.mp4


23/42


IN FOCUS

Keep in mind that the combined weightsof the technology, media and telecomsectors reached 46% of the S&P 500 bymarket cap in early 2000, a much higherpeak from which to fall. The energy sec -tor peaked at 16% of the S&P 500 in2008, and now accounts for only 6%.Scaling the potential credit impact pro-vides additional valuable insight. Whilethe 70% decline in oil prices will createloan losses for several regional banks,only 2-7% of loans are energy-related.

Compare this to 2008, when well overhalf of total bank loans were tied to realestate. Furthermore, increased capitalrequirements and annual bank stresstests mitigate the risks of another bank -ing crisis.

What about corporate pro ts? S&P 500company earnings last year failed togrow at all, but excluding the 60% dropin energy pro ts, they were up 7%. Thisyear, the headwinds from low oil pricesand a strong US dollar should be smaller,and we expect companies to producepositive mid-single-digit growth. Sup-porting this view is the fact that energynow comprises less than 5% of S&P 500earnings, down from 11% in 2014.

Similarly, China accounts for only 5% ofS&P 500 pro ts, far less than Europe orthe rest of the emerging markets. To besure, a rapid slowdown in China wouldpresent serious risks to global growthand corporate pro tability. But we be -lieve this scenario has been given toomuch weight in market pricing. Chinasmanufacturing sector continues to strug -gle, but retail sales growth remains ro-bust and the services sector sits rmly inexpansion territory. We see only a 10%

chance of sub-5% GDP growth in Chinathis year. Our base case is a continua-tion of Chinas growth transition andmoderation. While this may create dif -

culties for companies supplying indus -trial equipment to Chinas old growthmodel, it should not materially threatenglobal growth.

When the tide comes back inIn his In Context piece earlier in thispublication, UBS WMA Chief InvestmentStrategist Mike Ryan lists some of thefactors he will be watching as we lookfor an end to the current market tumult.Investment opportunities lie at the endof that list. Past growth scares, mostnotably in 2011, have o en provided

excellent windows to deploy newmoney or replenish diminished equity al-locations. While return expectations forrisk assets in 2016 are not lo y, they area good deal better than those availableon cash and short-term xed income.

Source: UBS Investment Research, as 31 December 2015

100

100

50

0

50

150

Consumer savings ongasoline spending

Investment inenergy extraction

Fig. 2: Positive net effect of oil prices on US economyConsumer savings vs. investment decline due to 2015 energy pricecollapse, in USD

$115B

$71B


0.25

0.50

0.75

0.50

0.25

0.00

1.00

2013201020072004200119981995 20161992

Fig 1: Equity-commodity correlation unusually high

12-month rolling correlation of daily returns, S&P 500 and BloombergCommodity Index


24/42


Given the large size and earnings po-tential of Millennials, we believe thatcompanies with positive exposure tothis rising generation will experiencea growth tailwind in the years tocome. The types of companies thatstand to bene t from this generationinclude certain innovative technology

companies, wellness-focused brands,and service-oriented industries.

This is a generation of digital na -tives. Its passion for and uencywith technology is fueling growth ine-Commerce, social media services,and mobile applications. Additionally,easy access to information is lead -ing to more informed consumptiondecisions that favor cost-competitiveonline retailers and wellness-focusedbrands. Finally, this commitment-freegeneration is renting in large num-bers and supporting the growth insharing economy services.

Top themes

u Growth opportunities

u Multi-year:Decade theme

u Portfolio integration

As a satellite holdingwithin a US equity port-folio, through our recom-mended basket of singlesecurities within the con-sumer and technologysectors.

u Full report


Highlights from our monthly selection of highest conviction investment themes across the asset class spectrum

The rising MillennialsSally Dessloch

US equityUS and non-USxed income

Portfolio contextThe path to a normalized growth andinterest rate environment will produceheadwinds for xed income investorsover a medium- to longer-term period.Higher rates will exert pressure on prin -cipal values, and low starting yields willlead to greater bond price sensitivity.Accordingly, future xed income returns

are likely to be more modest, with start-ing yield levels being a strong indicatorof future performance.

We recommend diversifying bond port -folios away from traditional taxable

xed income benchmarks that are heav -ily government-weighted (i.e., BarclaysAggregate Index), and incorporatingother types of beyond-benchmarkassets. In our view, the exibility pro -vided by extending beyond a traditionalbenchmark should add value more of -ten than not over longer market cycles.We favor credit spread sectors and in -vestment approaches that are exibleand that utilize active management.

Portfolio context

u Equity growth andincome

u Multi-year:Decade theme


Diversify away from high-quality bond portfolios to-ward greater exposure tocredit spread sectors and

actively managed xedincome strategies.

u Full report

Beyond benchmark xedincome investing

Beyond benchmark xed income investingBarry McAlinden, CFA; Leslie Falconio; Stephen Freedman, CFA;David Wang

Source: BAML, UBS, as of 31 December 2015

6

78

45

21

3

0

9

A g e n c i e s

M B S

T I P S

T r e a s u r i e s

I G c o r p s

H Y c o r p s

P r e f e r r e

d s

S e n

i o r

l o a n s

S e c u r i

t i z e

d

Yields at higher starting point helps future returns

In %

Year end yield 2015Year end yield 2014

Source: UBS Evidence Lab, UBS Investment Bank, Examining Consumer Usage of Social Media, as of 8 December 2014

LinkedIn

Pinterest

WhatsApp

InstagramTwitter

SnapChat

Facebook

Age 1317Age 1834

10 20 30 40 50 60 700

Millennials are using social media at higher rates than oldergenerations

Daily users of each service by age group, in %

Age 3554Age 55+


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The investment themes highlighted inthis section are among our highest convictionthematic recommendations. The full list ofmost preferred themes (see below) isdiscussed in our monthly publicationentitled Top themes.

Preferred themes US technology: Secular growth, on sale

Eurozone comeback

Major advances in cancer therapeutics

North American energy independence:Reenergized


Beyond benchmark fxed income investing


Ask your Financial Advisor for a copyof this publication.

a b

Thematici nvestment ideas from CIO Wealth Management Research

Top themesFinancials returningcapital

February 2016

Highlights from our monthly selection of highest conviction investment themes across the asset class spectrum

Top themes

Human capital is the value of an indi -viduals future labor income, and rep -resents an important intangible assetclass that should be considered along-side stocks and bonds. It tends to bethe largest early in ones professionalcareer, and runs down as retirementnears. Human capital has character-

istics that are more bond-like thanequity-like. Therefore, considering anindividuals entire net worth (includinghuman capital) suggests holding alloca-tions to stocks, with the allocations de-clining over time along a certain glidepath. The speci c path depends onthe individuals type of work. Anotherimplication is that a permanent loss ofhuman capital can have devastatingconsequences for a household. There -fore, it is critical to protect the value ofhuman capital through life insuranceand disability insurance strategies.

u Equity growth andincome

u Medium-term:6 to 12 months


Implications for strategicasset allocation and forinsurance strategies.

u Full report

Valuing your humancapital

Valuing your human capitalMichael Crook, CAIA

Portfolio context

Source: UBS, as of 31 December 2015

Human capitalFinancial assets

80

0

20

40

60

100

25 27 29 31 33Age

35 37 55 5751 5347 4941 43 4539 59

Human capital as a percentage of assets declines over timeIllustrative total wealth balance sheet, % of total wealth


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Overweight

Neutral

UnderweightKey forecastsAs of 20 January 2016


6-month forecast

Asset class TAA1 Change Benchmark Valuem/m perf.

in %2 House ViewPositive

scenarioNegativescenario

EQUITIES *

USA S&P 500 1859 -7.3% 2025 2250 1700

Eurozone * Euro Stoxx 305 -11.2% 325 385 270

UK FTSE 100 5674 -6.3% 5925 6650 5000

Japan Topix 1339 -12.9% 1400 1700 1200

Switzerland SMI 7966 -7.5% 8375 9400 7150

Emerging Markets * MSCI EM 693 -12.3% 715 825 590

BONDS *

US Government bonds 10yr yield 2.0% 1.4% 2.5% 2.93.3% 1.72.1%

US Corporate bonds Spread 190 bps 0.0% 125 bps 100 bps 250 bps

US High yield bonds Spread 827 bps -3.2% 590 bps 450 bps 1100 bps

EM Sovereign Spread 485 bps -1.4% 380 bps 300 bps 520 bps

EM Corporate Spread 478 bps -3.1% 400 bps 320 bps 540 bps

OTHER ASSETCLASSESGold Spot price 1101 /oz. 3.3% 1050 1300 900

Brent crude oil Spot price 27.88 /bbl. -24.4% 45 70 20

Listed real estate EPRA/NAREIT DTR 3899 -7.3% 4300 4500 3700

CURRENCIES Currency pairUSD NA NA NA NA NA

EUR EURUSD 1.09 0.2% 1.08 1.15

GBP GBPUSD 1.42 -4.7% 1.55 NA NA

JPY USDJPY 117 -3.5% 127 >128


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DETAILED ASSET ALLOCATI

Detailed asset allocationtaxable with non-traditional assets

Investorrisk pro le

Conservative Moderately conservative

Moderate Moderatelyaggressive

Aggressive

C h a n g e t h i s m o n t h

All gures in %

S t r a t e g i c a s s e t a

l l o c a t i o n

C I O t a c t i c a

l d e v i a t i o n


C u r r e n t a

l l o c a t i o n 1


l l o c a t i o n

C I O t a c t i c a

l d e v i a t i o n


C u r r e n t a

l l o c a t i o n 1


l l o c a t i o n

C I O t a c t i c a

l d e v i a t i o n


C u r r e n t a

l l o c a t i o n 1


l l o c a t i o n

C I O t a c t i c a

l d e v i a t i o n


C u r r e n t a

l l o c a t i o n 1


l l o c a t i o n

C I O t a c t i c a

l d e v i a t i o n


C u r r e n t a

l l o c a t i o n 1

Cash 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

Fixed Income 69.0 +0.0 69.0 57.0 +0.0 57.0 46.5 +0.0 46.5 41.0 +0.0 41.0 33.0 +0.0 33.0

US Fixed Income 62.0 +2.0 64.0 51.0 +2.0 53.0 40.5 +2.0 42.5 34.0 +2.0 36.0 26.0 +2.0 28.0US Govt 7.0 -0.5 6.5 5.5 -0.5 5.0 4.0 -1.0 3.0 3.5 -1.0 2.5 2.0 -1.0 1.0

US Municipal 50.0 +0.0 50.0 39.0 +0.0 39.0 30.0 +0.0 30.0 24.0 +0.0 24.0 17.0 +0.0 17.0

US IG total market 4.0 +1.5 5.5 3.5 +1.5 5.0 3.0 +2.0 5.0 2.5 +2.0 4.5 2.0 +2.0 4.0

US IG 15 years 0.0 +1.0 1.0 0.0 +1.0 1.0 0.0 +1.0 1.0 0.0 +1.0 1.0 0.0 +1.0 1.0

US HY Corp 1.0+0.0 1.0 3.0 +0.0 3.0 3.5 +0.0 3.5 4.0 +0.0 4.0 5.0 +0.0 5.0

Intl Fixed Income 7.0 -2.0 5.0 6.0 -2.0 4.0 6.0 -2.0 4.0 7.0 -2.0 5.0 7.0 -2.0 5.0

Intl Developed Markets 6.0 -2.0 4.0 4.0 -2.0 2.0 3.0 -2.0 1.0 3.0 -2.0 1.0 2.0 -2.0 0.0

Emerging Markets 1.0 +0.0 1.0 2.0 +0.0 2.0 3.0 +0.0 3.0 4.0 +0.0 4.0 5.0 +0.0 5.0

Equity 16.0 +0.0 16.0 27.0 +0.0 27.0 34.5 +0.0 34.5 45.0 +0.0 45.0 55.0 +0.0 55.0

US Equity 9.0 +0.5 9.5 15.0 +0.0 15.0 20.0 +0.5 20.5 26.0 +0.5 26.5 31.0 +0.5 31.5

US Large cap Growth 2.5 -0.5 2.0 4.5 -1.0 3.5 6.0 -1.0 5.0 8.0 -1.0 7.0 9.5 -1.0 8.5

US Large cap Value 2.5 -0.5 2.0 4.5 -1.0 3.5 6.0 -1.0 5.0 8.0 -1.0 7.0 9.5 -1.0 8.5

US Mid cap 3.0 +0.0 3.0 4.0 +0.0 4.0 5.0 +0.0 5.0 7.0 +0.0 7.0 8.0 +0.0 8.0

US Small cap 1.0 +1.5 2.5 2.0 +2.0 4.0 3.0 +2.5 5.5 3.0 +2.5 5.5 4.0 +2.5 6.5

International Equity 7.0 -0.5 6.5 12.0 +0.0 12.0 14.5 -0.5 14.0 19.0 -0.5 18.5 24.0 -0.5 23.5

Intl Developed Markets 4.0+0.5 4.5 7.0 +1.0 8.0 8.5 +1.0 9.5 11.0 +1.0 12.0 14.0 +1.0 15.0

Emerging Markets 3.0 -1.0 2.0 5.0 -1.0 4.0 6.0 -1.5 4.5 8.0 -1.5 6.5 10.0 -1.5 8.5

Commodities 4.0 +0.0 4.0 4.0 +0.0 4.0 4.0 +0.0 4.0 5.0 +0.0 5.0 5.0 +0.0 5.0

Non-traditional 11.0 +0.0 11.0 12.0 +0.0 12.0 15.0 +0.0 15.0 9.0 +0.0 9.0 7.0 +0.0 7.0

Hedge Funds 11.0 +0.0 11.0 12.0 +0.0 12.0 10.0 +0.0 10.0 3.0 +0.0 3.0 0.0 +0.0 0.0

Private Equity 0.0 +0.0 0.0 0.0 +0.0 0.0 5.0 +0.0 5.0 6.0 +0.0 6.0 7.0 +0.0 7.0

Private Real Estate 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

WMR tactical deviation legend:Overweight Underweight Neutral Change legend: p Upgrade q Downgrade *Refers to moderate-risk pro le. 1The current allocation column is the sum of the strategic asset allocation and the tactical deviation column.

Source: UBS and WMA AAC, 21 January 2016. See appendix for information regarding sources of strategic asset allocations and their suitability, investor risk pro les, and the interpretation-gested tactical deviations from the strategic asset allocations.


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DETAILED ASSET ALLOCATION

Detailed asset allocationtaxable without non-traditional assets

Investorrisk pro le

Conservative Moderatelyconservative


Aggressive


All gures in %


l l o c a t i o n

C I O t a c t i c a

l d e v i a t i o n


C u r r e n t a

l l o c a t i o n 1


l l o c a t i o n

C I O t a c t i c a

l d e v i a t i o n


C u r r e n t a

l l o c a t i o n 1


l l o c a t i o n

C I O t a c t i c a

l d e v i a t i o n


C u r r e n t a

l l o c a t i o n 1

B e n c h m a r k a

l l o c a t i o n

C I O t a c t i c a

l d e v i a t i o n


C u r r e n t a

l l o c a t i o n 1


l l o c a t i o n

C I O t a c t i c a

l d e v i a t i o n


C u r r e n t a

l l o c a t i o n 1

Cash 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0 0.0 +0.0 0.0

Fixed Income 80.0 +0.0 80.0 66.0 +0.0 66.0 54.5 +0.0 54.5 44.0 +0.0 44.0 33.0 +0.0 33.0

US Fixed Income 72.0 +2.0 74.0 58.0 +2.5 60.5 47.0 +2.0 49.0 36.0 +2.0 38.0 26.0 +2.0 28.0US Govt 8.0 -0.5 7.5 7.0 -0.5 6.5 5.0 -1.0 4.0 3.0 -1.0 2.0 2.0 -1.0 1.0

US Municipal 58.0 +0.0 58.0 45.0 +0.0 45.0 35.0 +0.0 35.0 26.0 +0.0 26.0 16.0 +0.0 16.0

US IG total market 4.0 +1.5 5.5 3.0 +2.0 5.0 3.0 +2.0 5.0 2.0 +2.0 4.0 1.0 +2.0 3.0

US IG 15 years 0.0 +1.0 1.0 0.0 +1.0 1.0 0.0 +1.0 1.0 0.0 +1.0 1.0 0.0 +1.0 1.0

US HY Corp 2.0+0.0 2.0 3.0 +0.0 3.0 4.0 +0.0 4.0 5.0 +0.0 5.0 7.0 +0.0 7.0

Intl Fixed Income 8.0 -2.0 6.0 8.0 -2.5 5.5 7.5 -2.0 5.5 8.0 -2.0 6.0 7.0 -2.0 5.0

Intl Developed Markets 6.0 -2.0 4.0 5.0 -2.5 2.5 4.0 -2.0 2.0 3.0 -2.0 1.0 2.0 -2.0 0.0

Emerging Markets 2.0 +0.0 2.0 3.0 +0.0 3.0 3.5 +0.0 3.5 5.0 +0.0 5.0 5.0 +0.0 5.0

Equity 16.0 +0.0 16.0 30.0 +0.0 30.0 40.5 +0.0 40.5 51.0 +0.0 51.0 62.0 +0.0 62.0

US Equity 9.0 +0.5 9.5 18.0 +0.0 18.0 23.0 +0.5 23.5 29.0 +0.5 29.5 36.0 +0.5 36.5

US Large cap Growth 3.0 -0.5 2.5 5.0 -1.0 4.0 7.0 -1.0 6.0 9.0 -1.0 8.0 11.0 -1.0 10.0

US Large cap Value 3.0 -0.5 2.5 5.0 -1.0 4.0 7.0 -1.0 6.0 9.0 -1.0 8.0 11.0 -1.0 10.0

US Mid cap 2.0 +0.0 2.0 5.0 +0.0 5.0 6.0 +0.0 6.0 7.0 +0.0 7.0 9.0 +0.0 9.0

US Small cap 1.0 +1.5 2.5 3.0 +2.0 5.0 3.0 +2.5 5.5 4.0 +2.5 6.5 5.0 +2.5 7.5

International Equity 7.0 -0.5 6.5 12.0 +0.0 12.0 17.5 -0.5 17.0 22.0 -0.5 21.5 26.0 -0.5 25.5

Intl Developed Markets 4.0+0.5 4.5 7.0 +1.0 8.0 10.0 +1.0 11.0 12.5 +1.0 13.5 15.0 +1.0 16.0

Emerging Markets 3.0 -1.0 2.0 5.0 -1.0 4.0 7.5 -1.5 6.0 9.5 -1.5 8.0 11.0 -1.5 9.5

Commodities 4.0 +0.0 4.0 4.0 +0.0 4.0 5.0 +0.0 5.0 5.0 +0.0 5.0 5.0 +0.0 5.0

WMR tactical deviation legend:Overweight Underweight Neutral Change legend:p Upgrade q Downgrade *Refers to moderate-risk pro le. 1The current allocation column is the sum of the strategic asset allocation and the tactical deviation column.



29/42


DETAILED ASSET ALLOCAT

Detailed asset allocationnon-taxable with non-traditional assets


Investorrisk pro le

Conservative Moderatelyconservative


Aggressive


All gures in %


l l o c a t i o n

C I O t a c t i c a

l d e v i a t i o n


C u r r e n t a

l l o c a t i o n 1


l l o c a t i o n

C I O t a c t i c a

l d e v i a t i o n


C u r r e n t a

l l o c a t i o n 1


l l o c a t i o n

C I O t a c t i c a

l d e v i a t i o n


C u r r e n t a

l l o c a t i o n 1


l l o c a t i o n

C I O t a c t i c a

l d e v i a t i o n


C u r r e n t a

l l o c a t i o n 1


l l o c a t i o n

C I O t a c t i c a

l d e v i a t i o n

ubs economic outlook

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