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Year Ahead 2018
UBS House View
United States
ChieG *nWeTtNent 0GŖce ANericaT 8.
Changing context
ab
Mosaic Canyon Trail, Death Valley, California.
Dear reader,
Welcome to the Year Ahead 2018. Inside, we explore many of
the issues expected to impact economic performance and inves-
tor sentiment aŝer a year that challenged conventional wisdom.
In 201, we saw ongoing geopolitical turCulence, heightened
political and civil tensions here in the US and aCroad, and threats
to the gloCal Calance of power. At the same time, we experi-
enced strong and steady economic growth across a numCer of
regions and sectors. This divergence resulted in persistent uncer-
tainty aCout where the gloCal economy was heading and how
investors should react.
Against that CacLdrop, we now turn to the future and some of
the Ley factors that we anticipate will drive marLets in the
months ahead, including tighter monetary policy, political
upheaval, technological disruption, and suCstantial environmen-
tal and social challenges.
As with any landscape deŖned Cy constant change, investors
must worL hard to identify Coth opportunities and risLs as they
progress toward their Ŗnancial goals. So the Year Ahead also
ošers recommendations to help guide you and your portfolio
through 2018 and Ceyond.
The outlooL for 2018 is complex, and successfully navigating the
marLets will reRuire thoughtful insight and gloCal perspective.
The Year Ahead has Coth, and we thanL you for taLing the time
to read it.
Tom Naratil
1resident Wealth Management
Americas and President Americas
UBS
Year Ahead 2018 – UBS House View 5
Contents 8 Around the world 10 The beginning of history 12 Changing context 13 Recovery remains on sound footing 17 Monetary tightening 21 Political ŗux 26 Technological disruption 30 Sustainability challenges 34 How did we do last year? 36 Top risks 37 Much higher rates 40 Geopolitical shocks 44 China debt crisis 48 Regional hotspots 50 Dealing with change 51 Agility 53 Balance 56 Calm 59 US 60 Politics, policy, and proŖts 65 Asset Classes 65 Equities 66 Bonds 67 Alternatives 68 Currencies 70 Commodities 71 Economic forecasts 73 Key events
Highlights
Changing context
We expect another year of respectable eco-
nomic growth, higher corporate proŖts, and ris-
ing equity markets. But investors will need to
adapt to the changing monetary, political, tech-
nological, social, and environmental context.
Read more from page 12
Top risks
Although we expect the rally in equities to
continue, we see the three most prominent
threats as a signiŖcant rise in interest rates,
a geopolitical conŗict, and a China debt crisis.
Read more from page 36
Dealing with change
To protect and grow wealth in a period of
accelerated change, investors will need to
demonstrate a combination of agility, balance,
and calm, in our view.
Read more from page 50
Chapter title
Around the world
To discover more about how the changing context
will impact your region go to ubs.com/cio or use
the QR-codes.
US
US growth should remain solid in 2018.
We forecast a repeat of 2017’s 2.2% rise
in GDP, and expect two Fed rate hikes.
Within equities, we like the Ŗnancial sec-
tor, which could beneŖt from higher inter-
est rates, and the technology sector, which
is seeing secular growth as well as ošering
reasonable valuations relative to the mar-
ket. In addition, we like the energy sector
due to attractive valuations.
Emerging
markets
Emerging markets are well-positioned for
2018’s changing context. They are better
prepared for monetary tightening than
in the past, and technology is an increas-
ingly important part of the EM index.
Politics is a risk, but should be navigable
for well-diversiŖed investors. We see par-
ticular value in select EM credits.
8 ubs.com/cio
Chapter title
Europe
A stronger euro and Brexit uncertainty
are likely to weigh on Europe’s economy,
whose growth we expect to slow from
2.2% to 1.9%. We are positive on Euro-
zone equities relative to the UK’s, due to
contrasting earnings dynamics. It is likely
to be a tough year for euro credit inves-
tors. But we are optimistic on the euro, as
investors gain conŖdence in its longevity.
Asia
We see Asian economic growth of
6.1% in 2018, with innovation as a ris-
ing force in the medium term. We
expect China to maintain its policy direc-
tion, balancing reform and growth. We
particularly like Chinese equities and
Asian high yield bonds, and also favor
companies set to beneŖt from the tight-
ening labor market in Japan.
Switzerland
We expect Swiss growth to accelerate to
1.8% in 2018 from 0.8%. The SNB is
likely to hike rates once, toward the end
of the year, and we foresee modest franc
depreciation versus the euro. It will be
tough to make money in bonds, whose
yields are negative, and we see house
prices remaining unchanged. In equities,
we favor high-quality dividend payers.
Year Ahead 2018 – UBS House View 9
Chapter title
The
beginning
of history
Maldives. Syd Sujuaan. Unsplash
A decade from now, how will we look back
on 2017? As trivial or pivotal? At Ŗrst glance
it was straightforward: good growth and ris-
ing markets. But I think we caught a glimpse
of something stirring out there in the deep
blue.
Mark Haefele
Twenty-Ŗve years ago, Francis Fukuyama’s The End of His- Global Chief
tory and the Last Man hypothesized that the conclusion of Investment 0fŖcer
the Cold War signaled “the end of history”: the victory of Wealth Management
free-market capitalism and liberal democracy as the Ŗnal
state of human sociopolitical evolution. Yet 2017’s events
raised questions about this hypothesis. To paraphrase Police
Chief Martin Brody in the movie Jaws, “You’re gonna need
a bigger book.”
10 ubs.com/cioThe beginning of history
Will the apparent peak of central bank stimu- at any point since the end of the Cold War.
lus begin a journey to “normalization,” or will How will it play out? A golden, though proba-
the developed world economies prove unable bly unlikely, scenario is that heightened envi-
to perform without low rates and quantitative ronmental challenges and the existential ques-
easing? tions posed by science will bring countries
and people closer together in the quest for
Does Chinese President 9i Jinping’s speech on uniŖed solutions. A less-beautiful scenario,
globalization at the World Economic Forum echoing the Cold War struggle, would see a
and the success of the One Belt One Road ini- clearly victorious set of choices emerge, with
tiative show a new model of governance and extended hardship for those caught on the
development in China? Is it leaving increasingly “wrong” side.
fraught Western democracies behind, in a
quagmire of Twitterstorms, growing inequali- In a status quo scenario, perhaps likeliest of
ties, slower economic growth, and separatism? all, economic, political, and scientiŖc ideolo-
gies would continue to diverge, with ongoing
Will a new reality of human DNA editing, disharmony, as governments and peoples deal
neural implants, and artiŖcial intelligence with their problems in a piecemeal fashion.
redeŖne what it means to be human, and cre-
ate previously unimagined levels of inequality Regardless of whether time proves 2017 trivial
within and among nations? or pivotal, the world, in all areas of human
endeavor, seems to have entered a period of
And will China’s massive investment in green greater ideological divergence about what is
technology lead the world toward a cleaner the “right” way forward – for the economy,
future, or will the US withdrawal from the society, government, science, and the environ-
Paris Climate Agreement start a race to the ment. Investors will need to adapt to all these
bottom on pollution and emissions regula- changes to protect and grow their wealth in
tion? the year ahead.
Finding a new way forward
Leaders and electorates are facing ever-more
divergent options. And the consequences
of their choices are perhaps less clear than
Year Ahead 2018 – UBS House View 11Stocksy
Changing
context
We are positive on global equity markets as we enter the
new year, amid robust economic growth and limited evi-
dence of an impending downturn. But monetary, political,
technological, social, and environmental contexts are all
changing. Each will require investors to adapt.
12 ubs.com/cioChanging context
Recovery
remains on
sound footing
Global economic performance in 2017 looks Recession looks unlikely in 2018
to have been the best since 2011. Growth Periods of high economic growth oŝen sow
accelerated in the US, the Eurozone, China, the seeds of their own demise. But there is lit-
Japan, Russia, and Brazil, pushing GDP world- tle evidence today of an impending recession.
wide up to 3.8% from 3.1% in 2016, on our Historically, recessions have been caused by
estimates. The expansion has been particu- one or more of: oil price shocks, too-tight
larly impressive for its synchronicity. Only six monetary policy, contractions in government
other times in the past 30 years has every spending, and Ŗnancial/credit crises. None of
economy in the G20 grown. these look likely to materialize in 2018.
As we look ahead, we forecast little change in Oil prices are likely to move sideways. OECD
the positive economic backdrop. Both the US inventories are around 10% above historical
and Japan are beneŖting from strong labor norms, providing a cushion even if supplies
markets and solid corporate proŖtability. fall next year. Barring a signiŖcant rise in ten-
Growth could moderate in Europe, weighed sions in the Middle East, we expect Brent
on by a stronger euro and Brexit uncertainty, crude oil prices to trade at USD 57/bbl in
and in China, where property construction is 12 months’ time.
likely to slow in response to falling prices. But
ŗourishing economies in Brazil, whose recov- Central banks are likely to err on the side of
ery from the 2015–16 recession continues, caution as they tighten policy. Inŗation is sta-
and in India, where the economic reforms of ble, and core measures are likely to remain
the past 12 months should start taking ešect, below central bank targets. We expect just
should provide a positive ošset. two interest rate hikes in the US and Canada,
one in Switzerland, Australia, and New ;ea-
Overall, we expect growth of 3.8% in the land, and the Eurozone, UK, and Japan to see
coming year, a repeat of the healthy current rates on hold in the year ahead. Meanwhile,
rate of expansion, see Figure 1.1. quantitative easing will be withdrawn only
gradually in the US and Eurozone, and will
continue in Japan.
Year Ahead 2018 – UBS House View 13Changing context
Figure 1.1
Growth to remain healthy in 2018
Real GDP growth, global (%)
4.5 5
Forecast
4.0 4
3.5 3
3.0 2
2.5 1
2.0 0
2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: UBS
In aggregate, governments are likely to keep Long in the tooth?
net spending as a proportion of GDP broadly In parts of the world the economic expansion
unchanged. The era of austerity in Europe is has run for a long time. In the US, for exam-
over, and tax changes in the US could widen ple, continued growth in 2018 would make
deŖcits here. We foresee a global Ŗscal deŖcit for the second-longest period of postwar ex-
of 2.9% of GDP in 2018, down only slightly pansion. Only the 1991-2001 run would have
from the current 3.0%. lasted longer.
And leverage does not appear to be a particu- But we don’t expect the boom times to just
lar threat. The developed market private sector succumb to old age. The San Francisco Fed-
debt-to-GDP ratio is 164%, up minimally from eral Reserve has shown that data since World
a low of 161% in 2014, and down from a War II suggests the probability of a recession
2009 peak of 173% according to the Bank of does not rise signiŖcantly with the age of an
International Settlements (BIS). While debt is expansion. Improved inventory management,
climbing rapidly in China – it currently stands a higher share of services in the economy, and
at 258% of GDP according to the BIS – the more active policymaker management of busi-
government is well-positioned to manage its ness cycles have all contributed to a steadying
rise. External debt (i.e. that owed to overseas of economic cycles.
lenders) is just 13% of GDP, making China less
prone to crises of global conŖdence.
Learn more. Put this economic
cycle in context, and learn
So barring an exogenous shock, such as a more about previous economic
ŗare up in Middle Eastern tensions leading to cycles, and what brought about
signiŖcantly higher oil prices, or a conŗict be- their rise and fall.
ubs.com/cio
tween the US and North Korea, we believe a
downturn looks unlikely.
14 ubs.com/cioChanging context
Figure 1.2
Valuations consistent with further
upside
Average 6m subsequent total return MSCI AC World,
for given price-to-earnings ratio
MSCI AC World 6m return
9% We are here
6%
4%
–1%
< 13x 13–18x 18–23x > 23x
Price earnings
Positive on equities Note: Average total return of MSCI AC World index over the
following 6 months when the valuation is in the indicated valuation
Overall, solid growth and limited evidence of bucket at the end of the month. Based on data since 1987.
an impending slowdown keep us positive on Source: UBS, Thomson Reuters
global equity markets as we enter the new
year. At a trailing price-to-earnings ratio of
18.0x, global equities are priced broadly in changing. Abnormally low levels of volatility
line with their long-term average (18.3x). may end on the back of monetary tightening,
Prices are not yet at levels that have histori- political ŗux, technological disruption, and
cally presaged weak performance, though in- sustainability challenges, which each bring
vestors should not expect a repeat of the dou- their own set of opportunities and risks.
ble-digit annualized returns seen in recent
years. Historically, global equity valuations be- Monetary tightening: With almost a decade
tween 18x and 23x have been consistent with of monetary easing drawing to a close, inves-
6% subsequent 6-month performance, see tors will need to prepare for higher volatility
Figure 1.2. And, much like in 2017, robust and potentially higher correlations and stock
earnings growth should help push stock mar- dispersion. We see opportunities in the Ŗnan-
kets higher. cial sector and, for investors looking to reduce
portfolio volatility, in alternatives.
More generally, investors are wise to remem-
ber that avoiding taking proŖts too soon is 1PMJUJDBMÏVY: The political calendar will raise
critical for long-term performance. Since 1927, risks to local markets, with a particular likeli-
the average increase in the Ŗnal 12 months hood of heightened volatility in Brazil, Mexico,
before the end of a bull market has been Russia, South Africa, Spain, and the UK. That
22%. Missing these periods would lower in- said, US tax reform, and China’s One Belt One
vestors’ long-term annualized price returns on Road initiative, could provide investors with
the S&P 500 from 9.6% to just 7.2%. politically-driven investment opportunities too.
Changing context 5FDIOPMPHJDBMEJTSVQUJPO: New technologies
While our view on markets is positive, this will both delight and disrupt. Investors with
does not mean the coming year will be easy high weightings to individual industries under
for investors. The investment context is threat of disruption are at risk. But we see
Year Ahead 2018 – UBS House View 15Changing context
opportunity in companies enabling and adopt- 4VTUBJOBCJMJUZDIBMMFOHFT: The world will con-
ing big data technology, those supplying auto- tinue to face myriad challenges ranging from
mation and robotics solutions, and those that climate change, to resource overuse, and eco-
provide electronics and components for elec- nomic inequality. While the near-term ešect
tric cars and autonomous driving. on markets is uncertain, the sustainable in-
vesting industry can enable investors to play
an important role in the long-term solution,
while still seeking good risk-adjusted returns.
Nobel Perspectives
How long is left in the cycle?
&ENVOE41IFMQT /PCFM-BVSFBUFJO&DPOPNJD4DJFODFT
The boom is still going strong in the US, Looking forward, I expect that if the
and the booms developing in some other global growth in total factor productiv-
countries came as a surprise (as booms usu- ity – a weighted average of labor pro-
ally do). They seem to be based on a loss of ductivity and capital productivity – is not
pessimism, and perhaps a new-found opti- signiŖcantly increased within the next
mism about the future. It looks like the four or Ŗve years, investment will return
growth rate of GDP in the US is running to the weak level relative to GDP that
around 3.0% p.a., and I think growth may we have seen over the past decades. It
continue at that rate for several quarters, seems to me that investors are already
but much depends on the tax-cut legisla- well-prepared for such a period of lower
tion: I believe the boom in the US is likely long-term returns.
to run on through 2018 if a tax cut is
passed and signed, and likely to run down Source: ubs.com/nobel
if there is no tax cut.
16 ubs.com/cioChanging context
Monetary
tightening
Central banks will tighten mone- spent almost a decade buying Ŗnancial assets
tary policy in the year ahead. We in an attempt to lower long-term interest
rates and boost economic growth and inŗa-
see no cause for alarm, and higher
tion. But with global GDP expanding at its
rates could even usher in opportu- fastest pace in six years, many central bankers
nities. But investors will need to believe the economy is now strong enough
prepare for higher volatility, cross- for them to start withdrawing stimulus.
asset correlations, and stock dis-
We expect the US Federal Reserve to reduce
persion.
the size of its balance sheet by less than 10%
over the course of the year, and to increase
Investors are likely to hear a lot about tighter interest rates twice. The European Central
monetary policy in 2018. Central banks have Bank (ECB) is currently buying EUR 60bn of
Figure 1.3
Central banks will be withdrawing liquidity by end-2018
Monthly net securities purchases by the world’s major central banks, in USDbn
250
200
150
100
50
0
–50
–100
8
8
9
0
1
1
2
3
4
4
5
9F
6
7
7
8F
00
00
00
01
01
01
01
01
01
01
01
01
01
01
01
01
/2
/2
/2
/2
/2
/2
/2
/2
/2
/2
/2
/2
/2
/2
/2
/2
01
10
07
04
01
10
07
04
01
10
07
04
01
10
04
07
Fed BoE SRB BoJ ECB Total
Source: UBS, Haver Analytics
Year Ahead 2018 – UBS House View 17Nevada, United States. Anubhav Saxena. Unsplash
Ŗnancial assets each month, but will reduce Central bankers remain responsive to eco-
this to EUR 30bn monthly from January to nomic data. They are only looking at raising
September, and we see it winding up its asset interest rates in response to more robust
purchase program by the end of the year. growth, and their stance could be interpreted
By the end of 2018, in our view, the Bank of as a vote of conŖdence in the economy.
Japan (BoJ) will be the only major central bank Should global growth or inŗation slow again,
leŝ providing monetary stimulus to the global or should Ŗnancial markets experience a sig-
economy, and in aggregate central banks will niŖcant dislocation, we would expect central
be net suppliers, rather than net demanders, banks to move to an easier stance.
of Ŗnancial assets for the Ŗrst time since the
start of the Ŗnancial crisis, see Figure 1.3. Inŗation is likely to remain contained. Unlike in
previous interest rate-hiking cycles, most central
No cause for alarm banks are not under pressure to slow inŗation,
Although the move away from monetary eas- which has remained stubbornly below targets.
ing marks a change, as long as it remains con- While policy may become less accommodative,
sistent with the global growth outlook, we do there is no need for it to become restrictive.
not see cause for investor alarm.
Finally, there are structural factors beyond
The scale of tightening is likely to be limited. quantitative easing that have helped suppress
The Fed’s “quantitative tightening” process is interest rates and bond yields in recent years.
going to reduce the size of its balance sheet They are not changing. The ongoing retirement
only modestly, and global central bank bal- of the baby boomer generation is lowering
ance sheets will still grow overall, thanks to prospective growth and reallocating savings to-
stimulus from the ECB and BoJ. Furthermore, ward Ŗxed income. The development of low-
given that the Fed estimates that its entire capital-intensity industries is dampening de-
quantitative easing program lowered long- mand for investment. And regulation continues
term bond yields by just 100 basis points, the to force pension and insurance fund managers
impact on yields directly resulting from this to stock up on long-term Ŗxed income assets.
round of quantitative tightening should be A large amount of the US Treasury market, for
limited. We forecast US 10-year yields of example, is owned by investors who have no
2.5% by the end of 2018. choice but to own them.
18 ubs.com/cioChanging context
Find out more about the history of
monetary easing, and its impact on
markets in the past decade.
ubs.com/cio
Changing dynamics points in monetary policy have seen a rise in
That said, we do expect tighter monetary bond-equity correlations, as equities and
policy to change market dynamics. bonds react to changing central bank policy,
rather than growth, see Figure 1.4. This dy-
Market volatility could increase as stimulus namic would increase portfolio volatility for
declines throughout the year. Investor conŖ- investors diversiŖed across equities and bonds.
dence in central bank intervention has helped
keep volatility close to record lows in recent And although bonds and equities might move
years. Even if we think most central banks will in tandem, correlations between individual
retain an interventionist policy, their tighter stocks could drop, as higher interest rates lead
stance could lead investors to doubt their will- investors to discriminate more strictly between
ingness to intervene. And governments will companies. For instance, we could see a shiŝ
need to Ŗnd new private sector buyers for net away from bond-proxy equities, while interest
new debt issuance. rate-sensitive stocks and sectors, such as Ŗ-
nancials, could perform better. In such an en-
Bonds and equities could rise and fall to- vironment, active managers might come to
gether, should investors grow concerned the fore, if intra-market correlations remain low.
about monetary policy. Historically, turning
Figure 1.4
Bond-equity correlations can turn positive at monetary turning points
13-week rolling correlation, S&P500, US 5-year Treasury
Hawkish
tone at
0.8 QE2 “Taper tantrum” Sintra
0.6 First US conference
rate hike
0.4 Start ECB QE
0.2
0
–0.2
–0.4
–0.6
–0.8
–1.0
2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: UBS, Bloomberg
Year Ahead 2018 – UBS House View 19Martin Reisch. Unsplash
Investment ideas Portfolio implications
– US financials: Higher interest rates gener- – Diversifying into alternatives: At turning
ally boost bank net interest margins. To the points in monetary policy, correlations
extent that a reduction in monetary stimu- between bonds and equities can rise,
lus indicates a positive macro-economic en- increasing portfolio volatility for investors.
vironment, Ŗnancials should also beneŖt Diversification into alternatives, including
from greater client activity, higher loan de- hedge funds, could help reduce volatility.
mand, and good credit quality.
– Active management: Reduced central
bank support should make stocks more
responsive to idiosyncratic factors. This
could aid active managers, who have
previously underperformed as central bank
policy support helped all stocks move up
together.
20 ubs.com/cioChanging context
Political ŗux
Politics will again dominate head- Economics, usually, trumps politics
lines. We expect its global market The relevance of geopolitics for investors is
debatable. Despite the signiŖcant media at-
impact to be limited, but it will
tention, and the plethora of political events
both present risks and bring op- and shocks in the past two years, the best
portunities at a local level. strategy for investors would have been to turn
oš the 24-hour news and stay invested, see
With Russia and China asserting their pres- Figure 1.5. Equity markets rose and volatility
ence on the global stage, North Korea devel- plumbed record lows. Indeed, trying to trade
oping nuclear weapons, political instability in the events could have been costly – the FTSE
the Middle East, the UK negotiating its exit 100 lost nearly 9% in the immediate aŝer-
from the EU, mid-terms in the US, and elec- math of the UK’s EU referendum, before
tions taking place in Italy, Brazil, Mexico, Russia, recovering within days, and closing the year
and Malaysia, global politics is in a state of sharply higher.
ŗux that will continue to play out through 2018.
Figure 1.5
Markets have proven relatively immune to political risk
MSCI All-Country World Index, since January 2016
Catalan crisis
500
French elections
450 Trumps’s victory
Brexit vote
China fears
400
350
Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17 Jul 17 Oct 17
Source: UBS, Bloomberg
Year Ahead 2018 – UBS House View 21Barcelona, Spain. 2017. iStock
We don’t think this calm represents market to the North American Free Trade Agreement
complacency. In general, we believe that the (NAFTA) might have meaningful ešects on the
impact of domestic politics on global markets UK, Spanish, Russian, and Mexican markets,
is overestimated. respectively, but their relative impact on global
markets is much smaller, and individual politi-
Politics is oŝen subjective. Events regarded as cal issues can cancel one another out.
negative by one group can be interpreted as
positive by another. Between October 2016 And since markets focus on long-term cash
and August 2017, overall US consumer ex- ŗows, policies instituted by a government
pectations, as measured by the University of whose mandate will expire tend to get dis-
Michigan, declined by 33 points among Dem- counted somewhat.
ocrat voters and rose by 47 points among Re-
publicans. This balancing ešect can neutralize
Test your ability to assess the
the impact of politics on consumer and busi- impact of geopolitical events on
ness conŖdence. markets, using historical case
studies ranging from World War
The ešect of political events also tends to be II to the Cuban Missile Crisis
and Brexit.
local and may not move markets internation-
ubs.com/cio
ally. Britain’s exit from the EU, Catalan sepa-
ratism, sanctions on Russia, and modiŖcations
22 ubs.com/cioChanging context
Specific potential impacts Second, if the global economy sušers a down-
While we don’t expect politics to sway global turn. With interest rates still at low levels, and
markets in the coming year, it can ašect in- the marginal returns from quantitative policy
vestors in three speciŖc circumstances: First, if diminished, Ŗscal policy could have a larger
events are extreme, such as wars. The 1940 role to play in supporting growth aŝer the
Battle of France caused the Dow Jones to de- next global downturn than in the last, when
cline by 14% in the week of the invasion. And central banks played an arguably larger role.
the oil crises of the 1970s and early 1980s, re-
sulting from the Yom Kippur War (and associ- Finally, since the impact of politics is greater
ated embargo), and the Iran-Iraq War, contrib- at a local level than at a global level, even rel-
uted to global Ŗnancial market turmoil. In this atively minor local political events can ašect
regard, we will be monitoring geopolitical investors who are too heavily concentrated in
risk, notably in the Middle East and on the individual regions or sectors.
Korea Peninsula, particularly closely.
Local geopolitical risks in 2018 – exposed investors should seek diversiŖcation
Event "ŤFDUFEDPVOUSZ Description
Brazil election Brazil Victory by a populist candidate in next year’s presidential election
could derail the reform progress and lead to further deterioration
of the Ŗscal condition.
NAFTA Mexico Hiccups in the NAFTA negotiation, a potential Lopez Obrador
negotiations administration, and inŗation stoked by a weak peso could all cause
Mexican assets to underperform.
US Treasury Russia As the US Treasury prepares a report to be delivered by February,
report on Russia possible new sanctions from the US could raise the risk premium on
Russia assets.
ANC South Africa Amid the country’s bleak growth and Ŗscal situation, the new leader
conference elected at the ANC conference in December may bring changes –
for better or worse.
Catalonia Spain Ongoing political uncertainty over the political status of Catalonia
separatism could boost volatility for Spanish assets.
Brexit UK Uncertainty about Brexit could result in higher volatility for UK asset
negotiations prices as negotiations progress.
Year Ahead 2018 – UBS House View 23iStock
Investment ideas – One Belt One Road: China’s investment
in One Belt One Road infrastructure pro-
We see the potential for politically-inspired jects is gaining momentum. We see
volatility in Brazil, Mexico, Russia, South Af- spending doubling in the next five years
rica, Spain, and the UK. Regardless of our to USD 90–160bn and regard emerging
base case view on the individual regions, the market infrastructure companies as the
threat of political uncertainty means that we biggest beneficiaries.
believe investors heavily exposed to these
markets, and particularly those local investors
with a large home bias, should seek overseas Portfolio implications
diversiŖcation.
– Regional diversification: Investors looking
Meanwhile, we see politically driven opportu- to reduce exposure to local political risks
nities in the US and China, related to US tax should seek regional diversification.
reform, deregulation, and the One Belt One
Road initiative. – Asset class diversification: Although
we expect fixed income to underperform
– US tax reform: A reduction of the US equities in 2018, a mixture of the two asset
corporate tax rate to 25%, and repatriation classes can help insulate portfolios against
of foreign earnings could boost US earnings geopolitical risk.
per share by up to 10%.
– Rebalancing: The effect of geopolitical
– US deregulation: Legislation or actions events can often be short-lived, and
from the Trump administration could lessen committing to a regular portfolio rebal-
the impact of the Affordable Care Act. ancing strategy can aid in navigating
Meanwhile, changes to environmental and political uncertainty. Systematic rebalancing
financial regulations could boost the energy could improve pre-tax performance by as
infrastructure and financials sectors. much as 80 basis points per year.
24 ubs.com/cioChanging context
Nobel Perspectives
The geopolitical impact of the America-first presidency
3PHFS#.ZFSTPO /PCFM-BVSFBUFJO&DPOPNJD4DJFODFT
President Trump’s 2018 budget blueprint militarism may be found in security agree-
includes plans to increase military spend- ments directly between China and South
ing. But the proposed new investments in Korea, even though such agreements could
military hardware are not likely to make be interpreted as evidence of a decline of
any dišerence for America’s geopolitical American inŗuence in Asia.
power. Recent frustrations of US foreign
policy have not been due to any lack of Meanwhile, NAFTA is at risk aŝer being
military capability, but instead have been blamed by the President for contributing to
due to a weakness of diplomatic capabili- America’s longstanding trade deŖcit. But
ties for turning battleŖeld successes into this trade deŖcit has been driven primarily
positive political developments. by strong international demand for US
debt, based on global conŖdence in the
A nation’s power in international ašairs stability and reliability of the United States
depends as much on its ability to make government. America-Ŗrst policies could
credible long-term commitments as on its erode this conŖdence and weaken global
military might. In this regard, President demand for US debt, resulting in US fed-
Trump’s shiŝ to an opportunistic America- eral deŖcits becoming harder to Ŗnance
Ŗrst policy could actually weaken America’s under Trump than under Obama or Rea-
ability to achieve foreign-policy goals. gan. The result could be higher US interest
Withdrawal from major international rates aŝer tax cuts in 2018.
agreements will make it harder to build
conŖdence in any newly negotiated prom- Source: ubs.com/nobel
ises. In this environment, the best hope
for ešective containment of North Korean
Year Ahead 2018 – UBS House View 25Changing context
Technological
disruption
We are living in a time of rapid be unable to monetize their growth, and in-
technological development. We see vestors may miscalculate the sector that value
ultimately accrues to.
particular opportunities in digital
data, automation & robotics, and But technology is having a very real impact
smart mobility. But investors heavily too. In the most recent quarter, technology
exposed to individual companies or Ŗrms accounted for 23% of S&P 500 earn-
sectors are at risk of disruption. ings, up by 5ppts in three years. The tech sec-
tor is now the largest in the MSCI Emerging
Market and MSCI China indices. The number
Technology is developing rapidly. Quantum of patents granted has doubled over the past
computers can process data 100 million times decade, with 1.2 million approved worldwide
faster than any traditional computer. The Ŗrst in the last year of data. And the US Bureau of
driverless cars are loose on our roads. Earbuds Labor Statistics estimates that the economy
can translate dozens of languages in real will need 30% more soŝware developers over
time. And tech pioneers are setting their the coming decade, the fastest-growing
sights on even grander goals. Scientists are highly paid job.
developing living solar panels that can be
printed on paper, and have made strides in
their ability to perform surgery directly on Investment opportunities
DNA. Elon Musk’s Neuralink, meanwhile, aims
to enhance the human brain with implants, We remain conŖdent on the shorter-term
envisioning a future of telepathic communica- prospects for the US technology sector. We
tion. project 2018 earnings growth of 12–13%,
and see price-to-earnings ratios of 19.3x as
Some of these developments will prove to be reasonable. They currently trade on a 7.5%
more hype than substance. As the dotcom premium to the market relative to a 25-year
bubble showed, alluring visions don’t neces- average of 22%. But longer term we see the
sarily tally with attractive investments, even if most compelling technology-related opportu-
they are ultimately proven right. Technologies nities in three areas.
may take too long to develop, companies may
26 ubs.com/cioChuttersnap. Unsplash
Digital data: The volume of global Figure 1.6
data is growing exponentially. By 2020 More than 50x growth in digital data
the digital universe will be 44 by 2020
zettabytes large, equivalent to 318 iPhones Digital universe in zettabytes
per household, a 50-fold increase from 2010
50
levels, according to industry research Ŗrm
IDC, see Figure 1.6. Dramatic declines in the 40
cost of gathering, processing, storing, and
30
analyzing data has made it a crucial global
commodity dubbed “the new oil.” Yet the 20
vast majority of that data remains unex-
ploited. Companies that invest across the 10
09 10 11 12 13 14 15 16 17 18 19 20
data lifecycle – creation, transmission, stor-
age, processing, consumption, and monetiza- Source: IDC, EMC, UBS
tion – are well positioned for above-average
growth, in our view.
Figure 1.7
Automation & robotics: The world
More IoT devices than people
is undergoing a fourth industrial rev-
Units in billions
olution. A combination of factory
20
and process automation, additive manufactur-
ing technology, and artiŖcial intelligence is 16
transforming the way we manufacture and 12
distribute goods. The number of “Internet of World population:
7.7bn
8
Things” devices is soon set to surpass the num-
ber of people on the planet, see Figure 1.7. 4
And the International Federation of Robotics 0
expects 160,000 robots to be installed in Internet of PC/Laptop/ Mobile Fixed
Things (IoT) Tablets phones phones
China alone by 2019. We anticipate compa-
nies exposed to the theme posting c.13% 2016 2022
higher earnings per share in 2018, versus Source: Ericsson, UBS
Year Ahead 2018 – UBS House View 27Filip Filkovic Philatz. Unsplash
8–12% for the global equity market as a
whole, with industrial soŝware at the forefront.
Portfolio implications
– Avoiding single-stock and sector
Smart mobility: Regulatory action concentration: Investors concentrated in
and technological advances have companies or industries threatened by
pushed us to the cusp of a boom in smart disruption are at particular risk in an age of
mobility: electriŖcation of vehicles, autono- rapid technological change. In 2017, the
mous driving, and car-sharing business mod- food retail industry fell by 11% in the week
els. We expect the addressable market that Amazon announced it would purchase
to grow tenfold by 2025, with an inŗection Whole Foods, potentially sparking a price
point in the uptake of electric cars approach- war. Diversification across companies and
ing. In the coming year in Europe, we esti- sectors is key to mitigating this type of risk.
mate that the total cost of owning a battery-
powered electric vehicle will fall below that of
Discover the technology that we believe could
a vehicle with an internal combustion engine have a transformative effect on industries around
for the Ŗrst time. Inŗection points should fol- the world.
low in China by 2023 and in the US by 2025.
We see particular opportunities in companies
that supply electronics and electric compo-
nents related to electriŖcation and autono-
mous driving.
ubs.com/cio
Long-term themes
Digital data, automation & robotics, and smart mobility are thematic ideas that are
captured within our Longer Term Investments. This series of thematic investment
ideas should beneŖt from secular trends such as population growth, aging, and
urbanization.
28 ubs.com/cioChanging context
Nobel Perspectives
Is technology becoming a risk to jobs?
4JS$ISJTUPQIFS"1JTTBSJEFT /PCFM-BVSFBUFJO&DPOPNJD4DJFODFT
Ever since the industrial revolution, new But like globalization, new technology can
technology has been replacing human la- only beneŖt everyone if we manage the
bor. Steam power, the internal combustion transition well. CEOs will have to see how
engine, electricity, and the computer de- they can combine robotics with labor, and
stroyed jobs previously done by humans. be prepared to look outside the box for the
Each time, new jobs were created that had things that the new technologies can do.
the potential to make everyone better oš. Workers need to be more ŗexible in their
skills, and in the jobs that they are pre-
Again this time new jobs will appear to re- pared to contemplate. And governments
place the ones that robots and artiŖcial in- need to make sure that human decency
telligence destroy because there are still and high standards are maintained in the
many things that robots cannot do; such as new work environment and not panic into
jobs that involve decision making in unpre- blocking the advance of new technology.
dictable environments. And with robots The education needs of a country need to
doing the work, we will be able to work be re-thought, and the support mecha-
less and enjoy more of the products of the nisms for workers initially losing out ex-
new technology in our leisure time. panded.
Source: ubs.com/nobel
Year Ahead 2018 – UBS House View 29Changing context
Sustainability
challenges
The world will continue to grapple The world economy continues to expand in
with environmental and social a manner that cannot be maintained indeŖ-
nitely. Atmospheric carbon dioxide levels are
challenges in 2018. Whether there
the highest they’ve been in three million
is any progress in solving them in years, contributing to more frequent extreme
the face of global disunity remains weather events. Use of natural materials has
to be seen. But investors can play tripled in the past 40 years, leading to in-
an important role in furthering creased environmental degradation and chal-
lenges with urban pollution. And close to one
and funding solutions without
billion people still live on less than USD 2 per
sacriŖcing risk-adjusted returns. day, lack access to clean water, and sušer un-
dernourishment, contributing to the growing
challenge with global migration policies.
Figure 1.8
UN Sustainable Development Goals
THE GLOBAL GOALS
For Sustainable Development
Source: UN
30 ubs.com/cioSolar power station. Nevada, USA. Getty Images
Investors could have an important role to play Investment ideas
in the solution. In 2015, the UN created its
Sustainable Development Goals (SDGs) resolv- Green bonds: One of the fastest-growing
ing to, among other things, end poverty, com- segments of the Ŗxed income market, green
bat climate change, and Ŗght injustice, see bonds are conventional Ŗxed income instru-
Figure 1.8. The UN acknowledges that social ments in which the proceeds are earmarked
and legal structures have a role to play, but speciŖcally for projects with environmental
also recognize that fulŖlling this ambitious set value. One can invest, for example, in bonds
of 17 goals will require both public and pri- that target renewable energy, energy efŖ-
vate investment across all forms of capital – ciency, sustainable waste management, sus-
physical, human, and environmental. tainable land use, biodiversity conservation,
clean transportation, and clean water/drinking
This demand for private capital within the water. We believe one could expect diversiŖed
SDG framework, and the rapid evolution of green bond exposure to generate returns com-
the sustainable investment industry across a parable to a mix of traditional government and
broader range of asset classes, and with investment grade corporate bonds.
greater depth, means that investors now have
an opportunity to make a positive impact on Multilateral development bank bonds: Mul-
some of the world’s most pressing issues, tilateral development banks (MDBs) like the
while still seeking good risk-adjusted returns. World Bank Group play a critical role in provid-
ing development where it is needed most. In re-
cent years, they have Ŗnanced: irrigation services
for more than two million hectares of land; ac-
cess to an improved water source for 42 million
people; and the reduction of 588 million tons of
CO2-equivalent emissions annually, according to
the World Bank. Bonds issued by these banks
are typically AAA rated, are backed by multiple
sovereign governments, have never defaulted,
and can be considered, in our view, comparable
to high quality bonds such as US Treasuries.
Year Ahead 2018 – UBS House View 31Changing context
Equity strategies: By diversifying across sus- sustainability standard while still achieving a
tainable equity strategies, investors can look risk/return profile that is comparable to
to earn returns comparable to those available “conventional” investments.
from a standard globally diversiŖed equity
portfolio, while making a positive environ- – &4(*NQSPWFST Investors can help reward
mental and social impact. improvements in corporate behavior with
respect to social and environmental issues
– Thematic: By investing in companies likely by tilting allocations toward companies
to see increased demand as they address that have shown significant signs of
the world’s environmental and social improvement in recent months and years,
challenges, investors can both benefit from, and away from companies whose ESG
and support, the solutions such companies performance has deteriorated. We believe
offer. Our longer-term investment themes that investment strategies capitalizing on
include numerous companies involved, for ESG momentum should be able to deliver
instance, in expanding water infrastructure performance in line with, or better than,
in, providing renewable energy for, and broad-market benchmarks.
delivering healthcare equipment to
emerging markets. – ESG engagement: Fund managers can also
employ a shareholder engagement ap-
– &4(-FBEFST Leaders in environmental, proach to push company management into
social, and governance (ESG) standards making ESG improvements. This can have a
are those companies that not only avoid direct impact. For example, according to
major adverse effects on society and the data compiled and analyzed by Ceres, of
environment, but also seek to influence 779 climate-friendly shareholder proposals
their wider industry in improving Ŗled from 2013 to 2017, 36% were ad-
sustainability standards. Many of these opted without the need for a vote aŝer in-
firms view ESG factors as opportunities to vestors and the companies in question
improve financial returns. Empirical agreed that more needed to be done to
evidence suggests that it is possible to make sufŖcient progress in this area, i.e.
construct portfolios with an above-average by reducing their carbon footprint.
32 ubs.com/cioiStock
Impact investing: Impact investing is a key Portfolio implications
means of mobilizing private wealth to address
pressing global challenges and achieve the UN With the sustainable investment industry now
SDGs by 2030. Return-seeking private capital sufŖciently broad and deep, a fully diversiŖed
is best suited to addressing those SDGs where portfolio of sustainable investments can be
a market price can be attached to capital and constructed. We believe it can provide similar
where regulatory change is not as essential. risk-adjusted returns to those available from a
These areas include alleviating hunger by im- traditional diversiŖed portfolio:
proving food production and distribution, im-
proving access to and quality of healthcare
and education, and clean and ašordable Traditional Equivalent sustainable or
energy, among others. asset class impact investment
Global equities ESG Themes
ESG Leaders
ESG improvement
ESG engagement
Government MDB bonds
bonds
Investment Green/climate bonds
grade credit ESG Leaders
Private markets Impact private equity
Impact private debt
Year Ahead 2018 – UBS House View 33Changing context
How did we do
last year?
One year on from the publication of the
Year Ahead 2017, we look back at some
calls we made that proved right, and some
that did not.
Right
“ We forecast the euro and the British “ In spite of political uncertainty, we
pound appreciating relative to the are positive on emerging market
US dollar in 2017.” (EM) equities.”
Against the US dollar, the euro rose to 1.18 EM stocks climbed 34%, aided by rising
and the British pound to 0.89, from 1.06 commodity prices, a falling dollar, and stron-
and 0.86 at the time of writing in late ger-than-expected growth across the region.
2016, respectively.
“ We expect oil prices to trade at
“ We are positive on US equities, USD 60/bbl in 12 months.”
anticipating 8% earnings growth
in 2017.” Oil prices are currently trading at USD 63/bbl,
from USD 49/bbl at the time of writing in
US equities have risen 17% since our publi- late 2016.
cation date, with 2017 earnings growth
surpassing our estimates, up 10%.
34 ubs.com/cioMartin Forster, Unsplash
Wrong
“ We anticipate Eurozone growth of “ We expect the Federal Reserve to
1.3% in 2017, down from 1.6% in hike rates once in December and
2016. We expect Eurozone earn- twice in 2017.”
ings growth of 5–9%.”
The Fed did indeed hike rates once in
Eurozone growth surprised us to the up- December 2016 and has done so twice
side, reaching 2.3%, and earnings also sur- so far in 2017, but we think a third 2017
prised us positively, up 10%. hike now looks likely in December.
“ We expect China to manage its
slowdown ešectively, with growth
of 6.4%.”
China managed its slowdown so ešectively
that its GDP growth rate actually rose, ex-
ceeding our expectations. Growth for 2017
looks set to be 6.8%, up from 6.7% in
2016.
Year Ahead 2018 – UBS House View 35Johannes Schwaerzler. Unsplash
Top risks
The changing context brings risks that could weigh on
global markets in 2018. While there are many known
unknowns, and unknown unknowns, that could ašect
investors next year, we see three risks as the most promi-
nent: sharply higher inŗation might force central banks to
tighten policy aggressively, hurting growth; geopolitical
shocks could emerge from North Korea’s nuclear weap-
ons testing and from political instability in the Middle
East; and China could mismanage its rising debt, leading
to a greater-than-expected economic slowdown.
36 ubs.com/cioTop risks
Much higher
rates
In our base case, we expect central The risk scenario
banks to tighten monetary policy
Two circumstances could arise that might
only modestly. Inŗation should
prompt central banks to act more boldly, in our
remain muted, and there are few view. They are: a) an unexpected surge in inŗa-
readily quantiŖable signs of excess. tion, or, b) a dramatic change in how members
But signiŖcantly higher rates are a interpret economic data.
possibility.
An abrupt change in philosophy seems unlikely.
Key central bank personnel remain the same
in most regions, and the nomination of Jay
Powell as new Fed Chair suggests continuity
at the Fed. Powell has served at the US cen-
tral bank since 2012, and has supported the
current set of policies.
But a sudden rise in inŗation cannot be ruled
Figure 2.1 out. A sharp rise in oil prices owing to a sup-
US unemployment close to a ply outage in the Middle East is one outside
post-1970s low risk. But an arguably greater risk comes from
US unemployment rate (%) the possibility of rising wages and prices in
12
the US. At just 4.1%, US unemployment
11 is close to its lowest level since 1970, see
10
9
Figure 2.1.
8
7
6
Although wage growth remains subdued for
5 now, it is possible that a tipping point could
4
3
occur if companies face sufŖcient difŖculty
2 hiring that they are forced to raise wages mark-
71 76 81 86 91 96 01 06 11 16
edly to attract and retain staš. Similarly, if
Source: Bloomberg companies are running at full capacity and are
Year Ahead 2018 – UBS House View 37iStock
unable or unwilling to expand production, they ket downturn. Core inŗation ran slightly above
might raise prices to try and contain demand. the Fed’s target from 2005–07. During that
episode, the yield curve inverted, but equities
Although an increase in inŗation isn’t neces- continued to perform well through the hiking
sarily a bad thing in itself, should it become cycle, supported by strong economic growth.
apparent that inŗation is increasing too quickly, But the cumulative impact of higher rates ulti-
the Fed could be forced to raise interest rates mately contributed to a decline in the housing
rapidly to restrain demand. This would increase market, creating a catalyst for the unwinding
the risk of recession: every US downturn in of large economic imbalances, which culmi-
the past 45 years has been preceded by a steep nated in the Ŗnancial crisis.
rate hike cycle by the Fed.
Key signposts
Market impact
The leading indicators we will be watching
Slower growth and heightened uncertainty closely to determine if the probability of much
over the course of inŗation and interest rates tighter policy is rising include:
could prompt investors to demand higher risk
premia for equities and credit. In previous US – Average hourly earnings increases
recessions, a downturn in economic growth exceeding 3.5% (currently 2.4%).
was preceded, on average, by a 20% correc-
tion in the S&P 500. A correction of that mag- – Core personal consumption expenditure
nitude could be expected to be accompanied inŗation rising above 2.5% (currently 1.3%).
by lower commodity prices, and reduced
long-term bond yields. – Five-year/Ŗve-year breakeven inŗation
expectations surpassing 2.5%
(currently 1.8%).
Lessons from history
– Two-year yields rising above 2.5%
Inŗation running above target and Fed rate (currently 1.7%).
hikes don’t always immediately lead to a mar-
38 ubs.com/cioTop risks Investment ideas Portfolio consequences – Hedge funds: They have historically out- – 3FHJPOBMEJWFSTJÎDBUJPO It is unlikely that performed other asset classes when mone- every monetary region would simultaneously tary policy tightens, returning an average run into labor shortages or capacity con- annualized 11% versus 8% for the S&P 500 straints that would necessitate higher interest during the 1994–95, 1999–2000, and rates. By diversifying across monetary blocs, 2004-06 hiking cycles. They also provide investors can continue to beneŖt from rising diversiŖcation in case of higher equity-bond markets while insulating themselves against correlations. the risk of greater inŗation. – Long-duration government bonds as – $VSSFODZIFEHJOH By ensuring the cur- part of a well-diversiŖed portfolio. Although rencies of assets are matched to the curren- our base-case outlook on longer-duration cies of liabilities, investors can minimize government bonds is negative, the down- their exposure to potentially sharp currency side in absolute terms is likely to be rela- moves that could arise from abrupt mon- tively limited, given the structural support etary policy changes. they enjoy from aging populations and regu- lation. Meanwhile, they could be expected to rally in the event that the Fed provokes a recession. Year Ahead 2018 – UBS House View 39
Top risks
Geopolitical
shocks
In our base case we do not expect The risk scenario
ŗashpoints on the Korean Penin-
– /PSUI,PSFB Although we consider a “Ŗrst
sula or in the Middle East to disrupt
strike” unlikely, North Korea’s nuclear tests
markets. We see little incentive raise the risk and consequence of miscalcu-
for either North Korea or the US lation. For instance, test missiles could miss
to make a “Ŗrst strike.” And the their intended neutral targets, sparking
recent unease in the Middle East retaliation, or North Korea could miscalcu-
late the location or intention of US war-
we view as part of long-running
planes, which regularly conduct exercises
tensions between Saudi Arabia and in the region. The potential threat to Japan
Iran rather than the start of some- and South Korea, the world’s third and
thing potentially more serious. But eleventh-largest economies, respectively,
even a small chance of a geopoliti- means any conŗict, or fear thereof, could
have global consequences.
cal shock bears monitoring.
– Middle East: Saudi Arabia is the world’s
largest oil exporter, and controls most of the
marketAs 2.5–3 million barrels a day of spare
capacity. Its recent increase in tensions with
Iran has raised the risk of a disruption to oil
supplies. If proxy wars between Iran and
Saudi Arabia upset energy exports, and if
this coincided with renewed sanctions on
Iranian energy exports, the oil price, we
believe, could reach USD 80/bbl and stay
there for three to six months.
40 ubs.com/cioiStock
Market impact Key signposts
In the case of a military escalation, we would Given that most of the scenarios posit a rela-
expect risky asset classes to sell oš, particu- tively sudden escalation, monitoring the risk
larly those in the regions where conŗict is of a conŗict will be challenging. We will be
occurring (i.e. APAC or MENA). Traditional focusing on:
safe-haven assets such as Treasuries, and so-
called safe-haven currencies, such as the USD – /PSUI,PSFBWe will be watching for evi-
and CHF, should beneŖt. This could mean dence of its technological development.
that, counterintuitively, the Japanese yen The closer the country comes to creating a
could also appreciate, as it has at times this nuclear-enabled intercontinental ballistic
past year, in the event of rising tensions on missile, the greater the risk and consequence
the Korean Peninsula. of accidents or miscalculations. Increased
signs of military readiness in the US, North
Lessons from history Korea, South Korea, or Japan could also
provide cause for concern.
The Cuban Missile Crisis is perhaps the closest
parallel to the situation with North Korea, and – Middle East: Potential red ŗags would be
shows how stocks are likely to remain calm raised by a proxy war in Lebanon, pitting
right up to the moment of actual conŗict. Saudi Arabia against Iran, in addition to the
The Dow Jones fell 2% during the crisis, even conŗict in Yemen, tensions in Iraq, and the
with the world then arguably closer to a Third spat between the Saudi-led block and Qatar.
World War than at any point before or since. This might include the US issuing sanctions
against Hezbollah. The worst-case scenario
During previous episodes of large oil supply would be a direct confrontation between
shocks such as the Iranian revolution in 1979, Saudi Arabia and Iran.
and the Iraqi invasion of Kuwait in 1990, global
equities fell by about 15%, but recovered
within six months.
Year Ahead 2018 – UBS House View 41You can also read
