UBS: 3 investment lessons from the first half

UBS analysts reflect on the first half of 2024, highlighting three key takeaways for investors.

Global Equities Remain Rewarding: The bank says that despite market volatility, global equities delivered strong returns in the first half, with the MSCI All Country World Index gaining 13.5%. They note the US market led the surge, with the climbing 15.3% year-to-date, fueled by hopes of moderating inflation and potential Federal Reserve rate cuts.

AI Continues to Drive Growth: UBS acknowledges that artificial intelligence (AI) remained a dominant force in both business investment and market performance. In addition, NVIDIA (NASDAQ:)’s surge exemplifies the sector’s growth, highlighting the importance of exposure to AI and its integrators, tailored to individual risk tolerance and portfolio strategy.

Diversification Mitigates Political Risk: Early political debates in the US and uncertainties surrounding elections in India and France showcased the importance of diversification across asset classes, regions, and sectors, according to UBS. They add that these events caused market volatility, underlining the benefits of a diversified portfolio.

Looking ahead, UBS identifies three key themes for the rest of the year:

Prepare for Lower Interest Rates: With rate cuts anticipated, the bank says investors should consider bond ladders and high-quality bonds for income and potential price appreciation.

Seize the AI Opportunity: UBS believes investors should seize the AI investment opportunity and invest in “AI-enabled” portfolios, focusing on semiconductors and megacaps across the AI value chain while managing risk through capital preservation strategies.

Brace for US Elections: Furthermore, the bank highlights the upcoming US election as a volatility trigger. They tell investors to consider potential impacts on sectors like consumer discretionary and renewables and explore hedges like gold for geopolitical concerns, inflation, or the US budget deficit.