UBS Trending for Friday, January 22, 2021
trending every day you give us thirty minutes and we give you the most up to the minute market insights intellectual capital and best ideas from UBS and beyond it is Friday January twenty second twenty twenty one let's find out what's trending today stocks continue to make new highs almost daily yields remain lower for longer and all eyes are frequently on the goings on in Washington DC so what does it all mean for markets going forward also how should you be thinking about planning for retirement especially given the year that we're just coming off of. And as CIO calls twenty twenty one a year for new will how will that reflect on sustainable investing thanks for joining us everyone on this Friday I'm Anthony pastore glad you could be here. So the Dow and the S. and P. join the nasdaq in gaining some upward momentum as president Biden's administration had their first. Full day in office yesterday so does this signal investor optimism on Wall Street for training days to come. Well we'll talk about that right now with my first guest. The UBS
chief investment officer Solita Marcelli. Solita so nice to have you on the show. Great to speak with you and certainly we have a lot to get to but one of the things I wanted to start with was. What I said in my
intro we you know it's reported that Wednesday- the Dow and the S. to be had their best and dog racing days- gains since Ronald Reagan was sworn in for his second term. So what does that tell you about overall investor sentiment right now. Great to be with you. Outside tells you
that investors are excited by the new. Administration's policy agenda especially. Our president Biden's focus on initial call with COVID relief- last week as you know he unveiled a one point nine trillion dollars. Stimulus package that included extended unemployment benefits additional aid to state and local governments to help with the rollout of. Vaccines and funding for PPP program for businesses- it will be an extra fiscal boost on top of what Congress passed in December so.
This is certainly contributing to investor optimism. You know it's also been rumored that the top candidate for the anti trust position might be more favorable. To big tank than was initially anticipated which might be contributing to. Our
techs reset up performance against the broader market as well. So all in all it looks like the market is optimistic on initial fiscal spending and discounting the prospect of. A punitive regulation and additional taxes. It's also I think the most important to remember. At that. Fourth
quarter earnings have also been strong which acts. To the positive sentiment in the market. That's great so let us let's let's stick with that with what's on in Washington here because president Biden has certainly had. A very busy first two days in office your decide seventeen executive orders so what are you expecting his impact to be on the markets particularly in his first one Hundred Days in office. Yeah the buying policy agenda Anthony is wide ranging. And will have implications for many different sectors in the economy with the main drivers being what we talked about the both coverage relief. And also
the prospect for infrastructure spending. So we see additional upside in the more traditional infrastructure companies related to steel and aluminum. But also in those that would benefit from expansion of the five G. network. Greentech will be an important component of any infrastructure bill so even after the impressive rally in many of these companies. We see select opportunities in areas as like take a vehicles are renewable power in clean energy but we stressed that it's important to find stocks with still reasonable valuations.
The fact that you know one of president Biden's first executive orders was to rejoin the Paris climate accord. Exemplifies his commitment to these areas the last thing I'll mention here is that strong economic growth should lead to a slight rise in interest rates which should help financials. We see stronger economic growth and higher interest rates outweighing. The risk over the. Tional regulation when it comes to banks. Right Solita thinking
about all of the- potential things that are going to be happening over the next couple months meaning the economic cost recovery in the US of course with vaccine distribution comes the prospect for that I as you mentioned we're watching yields we've also got a potential one point nine trillion dollar. Stimulus package- that's going to be decided on to what is your outlook for the markets in twenty twenty one as you look out over the next eleven and a half months or so. We remain constructive on risk assets in twenty twenty one and- we maintain an overweight to equities in portfolios. Our personalities based on our expectations for continued fiscal spending an accommodative monetary policy from central banks. Around the world not just in the U. S. so
we see upside in developed markets- United States and outside of the United States. Small cap companies as well as U. S. mid cap companies. These stocks as you know Anthony are more levered to the pick up in economic growth. That we expect as vaccines are distributed and economies we open. So for this reason- we also have emerging market equities as a most- preferred. View we have a great
emerging market to that category only recently. Emerging markets should also benefit. From a weaker U. S. dollar and low developed markets at rates. Emerging market value sector in particular out looks attractive to us given its dividend yield of around three percent. For
those investors seeking to generate additional income while. Maintaining their equity exposure. Great and on the thematic side Solita any themes that are emerging that you are advising investors to be keeping an eye on anything that they should be maybe be a little bit wary of what your thoughts on. On that from the macro perspective there. Sure
so I think. You know we're optimistic on the rollout of five G. technologies- with. Low latency five G. allows for some of our most. Futuristic ideas to become reality right for example and healthtech. Five G. capabilities will allow for surgeries to be conducted. From
miles if not countries away. It would be a tremendous breakthrough in terms of tell us our dream. Also what time is driving can and be enabled by five G. but probably I told Anthony it will still take me some time before I'm comfortable taking my has of the wheels. When driving I only started driving again first time in twenty years during this pandemic- anyway side from that a widespread rollout of five G. networks- Karen Lucien is the way that we interact with. Technology in our leaders
has few letter- we discussed some of the areas of the market that are experiencing- you know bubble like characteristics. Like crypto related. Awesome I feel companies and seemingly unlimited amount of capital that is being raised. Through specs so we think that the sentiments warrant initial investor. Scrutiny going forward. I don't blame you at
all I have a sort of a thing about keeping my hands on the wheel so it's gonna be tough to get used to once that becomes the norm autonomous driving. Solita so thank you for that- it N. as we wrap up here so we do you know what sectors should investors maybe be keeping on their radar for this year that could be. Real opportunities for gains. All right now now and then we have four sectors. That we hold as
most preferred. Which includes. Consumer discretionary. Industrials financials and healthcare. So let me just go through each one very quickly.
In terms of consumer discretionary- it should. You know. That that sector should continue to benefit from strong. Consumer spending
especially given the COVID relief measures that were. Passed back in December and the prospect of more on the way. I'm not to mention the tail wind to home builders from low mortgage rates. Are when we come industrials we simply you know we spoke about this a little earlier but- this sector should benefit from a pickup. In global manufacturing. Activity the potential for infrastructure spending. And
improvements in mobility as vaccines are. Rolled out. Airspace is a large component of this industrial complex. In terms of financials. The better
economic growth and higher interest rates should be a tail. For financials we should see an improvement in loan growth this year and believe. Entering your- regulatory policies.
Would be limited in school. And lastly. On healthcare we see political risks fading. It even
with a unified democratic government government. The sectors offer strong dividend growth which is. You know extractive in a low. Interest rate world. Great Solita thank you so much Solita Marcelli Chief investment officer Americas FOR UBS thank you so much Solita have a great weekend. Thank you have a great weekend any. Thank you.
UBS is on social media every once you can certainly follow us on linkedin Instagram Twitter and Facebook Selena herself has our own linkedin account to make sure to follow her as well you'll find timely content from our best thinkers like Selena and intellectual capital that can help you make more informed investment decisions. You can also find access to UBS trending episodes as well as segment highlights coming up following the volatility and unprecedented nature of twenty twenty the prospect of planning for retirement might seem like a huge undertaking we'll talk you through some helpful tips to get you started. Next on UBS trending. Today's tip of the day these days there are more questions than ever before we can get two answers we have a question for you what do you want to accomplish understanding the bigger picture helps us organize your financial life in a framework that helps you pursue your goals today tomorrow and for generations to come learn more about UBS wealth way and how you can be more certain in uncertain times visit UBS dot com forward slash S. S. and click on experience UBS right at the top of the screen. Welcome back UBS
trending everyone I'm Anthony Pastore. For retirement can seem like a fairly daunting task especially with so much happening in the markets. Joining us to give some advice and ways that you can stay on track to reach your retirement goals this year is UBS chief investment officer is. Total wealth strategist Ainsley Carbone AZ always nice to have you here on the show welcome back. You know easily this is a
topic I know you've been you've been focusing on for quite some time and writing about it and- obviously being on podcasts and shows like this. What are some things that viewers today should be keeping in mind when they're looking at their retirement goals especially. Coming off of twenty twenty into this new year. Thank you Anthony got to be here- certainly can't talk about this topic I love this topic- but I think what's most important when thinking about your goals.
Is to keep in mind that your retirement goals are going to change- in that's especially true even over longer periods of time. And it's okay that it's going to change I mean you want to have a financial plan. That is going to adjust with you through life as your life changes you don't want to be in a situation where you have to change your life. Because of your financial plan. To receive
your further out. From retirement if you're younger- I mean oftentimes someone who's twenty five thinking about retirement when they're sixty five four years from now seems so daunting it's such a big picture it's such a- it's so far away it's hard to focus on anything. I think setting short term goals and something in the near future that's a lot more cheap mobile can be really helpful to kind of get you in the right direction. And then
if you're if you're closer to retirement at that point it's really important to sit down with your financial adviser if you're if you're thinking. Maybe within the next two years if you have any age in mind you want to first make sure that it's going to be possible and there's no real. Way to know what is possible in all the different possibilities until you can sit down with a financial adviser sort of like a financial coach. And kind of walk you through everything so I know we're getting. Kind of
or or leaving Crazy year going into a new one a lot of- optimism I think about the year ahead. So take the optimism meet with your financial advisor in just kind of work through all the different possibilities that that lie ahead of you in terms of your retirement plan. Yeah I like a call the call the F. financial coach I think that's a really important. Distinction immunity we they are financial advisors of course I work with and I know you do too. But they are coaches well and they can help you kind of guide you into. The
best decisions for your current life and what you're expecting down the road. Upgrading season I know you put out that the twenty twenty one retirement guide and- in there you mentioned the social security's. Cost of living adjustment. What is that looking like this year and how does it compare to other years. So the cost of living adjustment or the Cola- in twenty. Twenty one it was one
point 3% so the color is essentially. A raise that retirees are social security beneficiaries are going to receive each year if there is one- and it's the purpose of it is to help protect. The purchasing power of the benefits- by offsetting inflation so in twenty twenty one of retirees likely. Received a one point 3% increase. Which was the lowest
since twenty seventeen and twenty seventeen it was only point three percent. So what the Cola is based off of the consumer price index for urban wage earners and clerical workers. Which as you can tell by the name isn't going to be something that is very representative of what.
Retirees are spending their money on because- not all retirees. Are urban dwellers and not all of them are wage earners. So what with that being said you know if it's not representative of social security or excuse me if it's not representative of retirees and how they spend their money. A lot of right retirees are finding that it's not really keeping pace with their own personal expenditures inflation. So with that being said. A lot of people want to
know okay well what does this mean for my budget. And when it comes to your financial plan and looking at this and figuring out what it means in the context of you. It's really helpful to look at social security and see how it stacks up to. Other cost see how it looks relative to other changes in your expenses. By comparing how all of your your household income has adjusted relative to those expenses. It really just.
Allows you to get a better understanding of the true purchasing power not just of the social security but- any other income that you have coming in. Mmhm I know that one of the big questions that comes up quite a bit Ainsley is. From folks who say you know when should I start claiming social security because there are choices. For retirees to what should viewers consider when answering that question. Yes so the earliest you can claim social security retirement benefits is age sixty two and- you don't receive your full benefit until you reach full retirement age which which varies depending on your your birth but it's typically around sixty six or sixty seven so if you are going to claim it early before prior to your full retirement age you're going to receive a reduced benefit. Even with that reduced benefit the majority of people are still claiming the prior to their full retirement age and I think it's just because they think you know I can get this money now why not get it. But instead
of I think a lot of times also people look at the break even or they're trying to maximize the forward looking Paypal but I think it's really important to look be on that look look beyond that the check that would be coming in today in trying to think about what it means in the context of your overall financial plan and really what they can do for your family. Because social security when it's incorporated and appropriately into your financial plan it can be a great hedge against longevity risk which is the risk of outliving your assets and it can be a great- hedge against six a sequence risk which is the risk that you would experience- poor returns early on in retirement. So to make the most of this protection that social security can allow we always recommend you know delay until until you possibly can the latest you want to delay of course is seventy because beyond that it's not your benefits aren't going to increase but each each month that you go without- claiming your benefits between sixty two and seventy your benefits are going to increase. So delay
until you can or if you're experiencing a bear market earlier on in retirement and you haven't cleaned out think about turning that social security benefits on. It so that you can you can delay taking any withdrawals from your let's say your longevity portfolio or your retirement account while those assets are depreciated in a bear market now this is of course. Something that needs to be decided within the context of a financial plan with your financial adviser because if you need the money today by all means you need to make sure that you you take those. Are the income. But we you. Always think about it you have to think about what it means for you in your financial plan not just today but what I can do for you throughout the whole course of your retirement. Right and with people living longer than we ever have before that's certainly something to consider Ainsley what what would you say that are the most common. Misconceptions that you
hear about retirement. So one area that- it tends to have a lot of confusion is with Medicare or health care retirement so one one misconception that we talk about in the report in the twenty twenty one retirement guide is the fact that. Oftentimes people think Medicare is free when in reality it is not it can be very expensive but even if you know that there is a cost associated with it. There's always this big question mark this big gray area as to how much it's gonna cost and what your costs are going to look like and that can be really difficult to know how much you're gonna need to save for that. So what we want to a few resources in a report to- help you get a better idea of what those costs are going to look like but it ultimately can just be really helpful for your budget if you're going to if you look at how those. How
those costs those potential costs are going to defer you know looking at this chart that you have on the screen here a large portion of. Which tend to be a lot more predictable felt bill very from one year to the next likely but on a month to month basis it's a lot easier to know how much you're paying for those. So with that being said those type of predictable expenses or something you can really just built into your budget similar to how you would with another expense like your rent or your mortgage. But then there's also going to be the other thirty percent- a lot of out of pocket costs are associated with that in those out of pocket costs can be very very able sometimes it'll be a little bit more protected predictable maybe if it's associated with a- a prescription drug. In that case you can incorporate it into your and your budget as you would you know with your you can incorporate into your budget with your- premiums but for the other variable costs out of pocket costs associated maybe with a hospitalization if you get sick or you need surgery. Those can be very
significant so in that case you may want to think about what your out of pocket Max might be for year depending on your coverage if you have one. In set that amount aside an emergency fund that way you know if in fact you do incur those costs you have the money there to meet those needs it's not always going to be neat something that you need to spend money on. But by having that extra cushion in your financial plan you can just be. A lot more confident about the potential costs that you may incur coming ahead. Ainsley thank you so much I know this is such a weighty topic for so many people and the fact that. There are answers to those questions that you're putting in the report is really helpful in the Carbone. Total wealth
strategist for the chief investment office thank you so much for being here is a- thank you Anthony. Great have a great weekend and there is- the modern retirement the twenty twenty one my retirement guide is Ainsley has been referring to it's available by visiting UBS dot com forward slash F. S. or you can reach out to UBS financial advisor for a copy coming up next is twenty twenty one is being called the year of renewal how will that reflect on sustainable investing we're gonna talk about that next. And if you have a question or comment for us here in the studio please send us an email at UBS studios at UBS. .com.
Welcome back to UBS trending everyone I'm Anthony pastore in twenty twenty one is now officially underway and according to UBS it is going to be a year of renewal with sustainability being a key theme the chief investment officer outlined their views for the year ahead in December and recently updated this for you in light of the developments of the past few weeks joining us to give more insight into what outlook on sustainable investing in the year ahead is what it means for investors and how the view has involved is UBS sustaining investing. Strategist Amantia Muhedini. Amantia thank you so much I know that there's been a lot of changes are certainly been a lot of news going on and with a brand new White House sustainable investing is on the topped up everyone's minds so but let me start more big picture with you why is this the twenty one twenty twenty one why is this year- I your renewal. Hi Anthony good morning yes you're you're very right I mean a lot is happening all the time and- there's a lot to think about the- implications for investors to be aware of- but again as you say. You sent back are you at at the end of November or early December you thinking about. No just- that the year had twenty twenty one but really thinking about the longer term thank you. Is that we're going to
figure it out for yourself it makes sense right we- assault twenty twenty going to lockdowns arsenal which have. Continued in December and January in parts of the world including here in the U. S. and yes- we also see some glimmers of hope. In in the future we think that- with the vaccines having been approved and developed and we expect them to be widely rolled out. By the house. Off of twenty twenty one
which will trigger. You know further innovation and just. Starting to gradually come out of lockdowns and- more more growth across all sectors of the economy so really what we think about twenty twenty one- we see the opportunity here for you always think that the world will be. More more local articles when you world will be more local still some travel restrictions will. Be- more indexing. Transformation last year some things have changed a want you tell us what's happened since you actually wrote regarding sustainable investing in those reports.
Sure I'm so some things have changed and the fundamentals really happened prior our core views haven't changed if anything they've been accelerated so let's let's do a recap of what we wrote about he said that. Armed government and businesses and individuals are driving the shift towards sustainable investing in the growth of this investment approach and that that could happen this means troops however what has changed is that- we solve the Democratic Party- in a surprise win also send the George. Granting them eight in order to produce like outcome for the election. On Wednesday we saw president by Dan- where- into the presidency and start getting to work with a few executive orders already- so this- this is one of the main things that changes were wrote in in the November and December about the year ahead. And really this firm that argued that sustainable investing- has has the- a bright future of- so to speak out we saw this with the U. S.
opting to join back in in the climbed in the Paris climate agreement already on Wednesday as well okay in officially. Thirty days from now- however it's one of those changes which were signals for- they were really what that for that environmental. And social sustainable strategies. Right it's because the commitment that that president. Diminish have towards- clay change and- Amonte you a among the things I say so what come next what should investors be aware of now. Well I mean investors
should continue to be aware of the fact that something about investing remains our preferred solution for clients that are looking to invest. Globally and this is very much driven by- bye bye a wide range of things first we continue to think that sustainability. Factors are material- to. Performance and- investment portfolios and so they are accessible to all investors regardless of whether their primary- goal is to seek aligning with sustainability objectives or is the financial. Performance and returns the newly again kind of looking back in twenty twenty we saw another data point which supported this was all that most sustainable. Indices
outperformed or or perform compared with traditional ones- one example of this is the- and- I killed the four hundred social index which by the end of one twenty perform three percentage points higher than the S. and P. five hundred. That's just one example among. I and we think is true of asset classes well the way. So I in
six in. We are the green. And received. Market near. Hits once US- marking think this- this mark will be hit soon in twenty twenty one- working all the that because about the for days after classes well. And then more more broadly mean things investors to be aware of is that- as we're- going towards this post and then make more local world I think that companies will seek to further reduce their environmental impact- and footprint they will seek to strengthen their supply chain relationships- which report words and testicular the pandemic really and will seek to. Embrace day first and see as a result in part of both government action and the general shape off- The conversation and level of awareness off off these issues that we've seen during twenty twenty. All of these factors
will will investment of your where up in order to know Houthi position themselves- to take advantage of them. Right right certain I you said amount of growth we've since and- I is mass so it's incredible to see. See that have so I guess that takes us to where you left us off their second ago Monty how should investors be positioning their portfolios to buy into sustainability. Yeah and so it yet let me let me put all these trends together basically what are the implications there so- for one we think that all of these government support and then increasing focus on transparency both in government but also from investors. Broadly and from consumers will will benefit yes you read there and using more tax strategies serves as as just the we call these are strategies which select companies are best in class. Among their peers in managing. Risks or eighteen
taking advantage of the opportunities to grow or alternatively their companies which are showing positive momentum in how they're growing for your- from here to here. In in their ability to manage these risks and opportunities. And all of the insects will be well positioned as we gradually see the impact off the societal and regulatory shifts come come to life. One bucket. Second bucket that investors should be aware of and- are- is what we wrote. In my report on the next
big thing. We think that green. Broadly the area that you. Comp range from- engagement is my a valid. You efficient. To renewable energy all of these will also benefit from the increased focus on climate change and from there we- are support. A coming both from the
US and from from governments around the world scene- the proliferation of carbon net zero commitments by local and- will and- federal level kind of local level governments. And we think this will benefit greentech. Industries and then finally as I mentioned earlier in fixed income- green bonds are still showing that they have a relatively more stable profile in. Full time frames as well as multilateral Development Bank bombs are a really. Are good alternatives you US. Treasuries are are.
Government bonds- and the were by the same X. to investors may want with weeks earnings up in. Or of the- contributions the buyer- and certifier very active teacher this off that include in an attic income. Additional and then finally the fourth- back it for were in our to aware of our impact invest. So for those who like to add the next. Off intention measure in impact to their- there are multi turn it is we think will.
To for these long trend- once in. In game strategy. The closer- welcomes to this components in the quick markets as well as for investors looking to athletes. Private market protected year venture capital and so on exposure to their- portfolios broadly doing it you in class- solutions- brings the dual benefit of garments and then- contributing to making a intentional measurable positive. Change in the world. Amantia thank you a lot about there in the space-- and it's our a top that I know will be talking about a lot in the future Amantia Muhedini Investing with the chief investment office here UBS thank you Amantia. Thank you have a good day. You too have a
great weekend and if you have a question that you'd like answered on a future let's talk about money segment just like this one send it to you B. S. studios at UBS dot com and we may answer it right here on a future episode as always if you have questions about your investment portfolio or need any financial guidance please speak with your financial advisor. On Monday show we are going to set the table for the week ahead of the markets visit once again with the UBS evidence lab as we pull apart real estate data and talk about how that has an impact on what we expect for the economic recovery and we'll have another millennial Monday we're will focus on new year's resolutions for wealth planning. Until Monday I'm Anthony has story have a great weekend everyone and remember to keep an eye. On what's trending.