Looking ahead to the first half of 2024, analysts at UBS highlight three key takeaways for investors.
Global equity markets continue to perform well: The bank said that despite market volatility, global equity markets delivered strong returns in the first half of the year, with the MSCI All Country World Index up 13.5%. The bank noted that U.S. markets led the surge, up 15.3% year to date, buoyed by hopes of easing inflation and a possible Federal Reserve interest rate cut.
AI Continues to Drive Growth: UBS recognizes that artificial intelligence (AI) remains a dominant force in both business investment and market performance. Additionally, the rapid rise of NVIDIA (NASDAQ:) illustrates the growth of this sector and highlights the importance of exposure to AI and its integrators tailored to individual risk tolerance and portfolio strategies.
Diversification reduces political risk: Early political debate in the US and uncertainty surrounding elections in India and France have highlighted the importance of diversification across asset classes, regions and sectors, according to UBS. The firm further added that these events have caused market volatility, highlighting the benefits of a diversified portfolio.
Looking ahead, UBS has identified three key themes for the remainder of the year.
Prepare for lower interest rates: With interest rate cuts expected, investors should consider bond ladders and high-quality bonds for income and price appreciation potential, the bank said.
Seizing the AI opportunity: UBS believes investors should seize the AI investment opportunity and invest in “AI-enabled” portfolios, focusing on semiconductors and mega-caps across the AI value chain while managing risk through capital preservation strategies.
Get Ready for US Elections: Additionally, the bank highlights that the upcoming US elections will be a trigger for volatility. It urges investors to consider the potential impact on sectors such as consumer discretionary and renewable energy, and to consider assets such as gold as a hedge against geopolitical concerns, inflation and the US budget deficit.
