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UBP recommends looking outside of the US

The combination of monetary and fiscal policies globally should help drive corporate earnings.
Norman Villamin, UBP

While monetary easing has helped company earnings to be at “stable levels” in the past decade, combining this with fiscal stimulus or tax cuts should help earnings drive up, according to Norman Villamin, chief investment officer for wealth manager at Union Bancaire Privée.

“This pairing of monetary and fiscal is important. Previously, all we had was monetary, which was not that very helpful, but fiscal gets it going,” he said at a media briefing in Hong Kong.

A number of major economies have already begun with their fiscal policies, starting with the US at the end of 2017, followed by China and Japan last year, according to Villamin. Additional fiscal policies are also expected from the UK and Europe this year.

While global equity markets should benefit from the positive macroeconomic backdrop, Villamin believes that investors should start looking outside of the US market as the US dollar is weakening.

“The US dollar has started to weaken in the second half last year, and we expect that to continue going forward. So the story of the US leading the world has started to reverse.

“The S&P 500 obviously was a great market last year. But in local currency terms, what a lot of people do not realise is that the European markets also did well. So you are starting to see this convergence between the US and non-US markets, so we want investors to start looking outside the US for opportunities.”

Discreet annual calendar performance (%)

YTD 2020

2019 2018 2017 2016 2015


MSCI AC Europe


24.7 -9.58 13.67 8.32 5.26


S&P 500


31.49 -4.38 21.83 11.96 1.38


Source: FE Fundinfo


A stronger euro should be positive for European companies this year, he added.

“We think that European small- and mid-cap bottom-up stories will benefit from a stronger euro and stronger domestic stimulus, and will, therefore, be very attractive as we move through the course of the year,” Villamin said.

Selective in Asia

Turning to Asia, Villamin said that investors should be more “selective” when looking at opportunities in the region.

For example, he is not positive on India, given that its currency has continued to weaken.

“They also have a slowing domestic economy, so they need to deal with that.”

In China, Villamin suggests looking at areas where consumers have started spending more on, such as education, online entertainment, insurance and healthcare.

Meanwhile, investors who are looking for less volatility should look at Asean markets.

“The Asean markets are very domestic, so they have lower volatility and lower risk.”

Three-year annualised volatility

MSCI Asean Index


MSCI AC Asia Index


Source: FE Fundinfo


Overall, UBP is overweight global equities relative to fixed income, given the lower yields in bonds.

Other banks have also been positive on equities. UBS Wealth Management and BNP Paribas Wealth Management, for example, believe that modest earnings this year should help drive the global equity markets.

Part of the Mark Allen Group.