It is risky to own stocks with US-China trade war – UBS bear warning

The world has probably learnt by now to take every tweet and utterance by President Donald Trump with a large pinch of salt. First, he wants to buy Greenland, then he calls the Denmark Prime Minister nasty and generally it is regarded as another Trumpism; rantings of a man who spends too much time on Twitter. There are many examples of this. That is until it comes to trade, markets and stock. The past week is a case in point. When Trump told American companies to immediately start looking for alternatives to China; there was a sell-off. By Monday when he praised China for wanting to restart negotiations; stocks went up. It has resulted in what one strategist called "fragile sentiment". The danger of yo-yo emotion is that the overall mood would eventually be negative. A bit like a partner who keeps on dumping you and then reconciling; eventually you decide it is better to stay away. And this is how UBS Wealth sees the US-China trade war; it told its rich clients to stay away from stocks. – Linda van Tilburg

By Thulasizwe Sithole

UBS Wealth Management, which is the world's biggest wealth manager and oversees $2.5trn told its rich clients to look for alternatives to stocks and that they should cut exposure in their portfolios. The reason for this is that UBS Wealth fears that the trade war between the US and China and slowing global growth are starting to threaten world markets. The Financial Times reports that it is the first time since the 2012 Eurozone crisis that UBS Wealth is advising its rich clients to "trim its core equity recommendation to an underweight position."

Mark Haefele, global chief investment officer for UBS's wealth management group said in a note that "the US-China trade dispute has escalated in recent days, raising the risk of a cycle of retaliation that undermines global growth and equities markets." Haefele said it seemed less and less likely that the trade war would de-escalate before the end of the year and he told the FT that there was a risk of global and manufacturing growth slowing down.

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