UBS CEO Ermotti warns of investor complacency
UBS Chief Executive Officer Sergio Ermotti said that financial markets have become complacent in recent years despite mounting geopolitical and economic risks. He said this in an interview with CNBC Top News.
According to Ermotti, given the current situation, market volatility should be significantly higher. At the same time, investment in artificial intelligence, data centers and other new technologies has supported economic growth and financial markets, although periodic shocks have still occurred.
Geopolitical and economic risks
The head of UBS described the market environment as increasingly complex. Among the factors, he highlighted risks to energy and shipping linked to the war in Iran and Russia's war against Ukraine, U.S.-China rivalry that is creating strain in supply chains, as well as high borrowing costs and persistent inflation.
“New problems or new questions emerge without old ones being resolved or closed,” Ermotti said. In his view, under such conditions it is difficult and inappropriate for investors to adhere to overly categorical investment convictions.
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Diversification without abandoning the dollar
UBS clients with substantial wealth have diversified their investments across sectors and regions in recent quarters while continuing to invest in technology and artificial intelligence. At the same time, the overall allocation of their assets has not changed significantly over the year, and diversification does not mean a mass exit from U.S. assets or the dollar.
Ermotti noted that about a year ago, some funds were directed toward global emerging markets. In his assessment, this was more a placement of available funds than a reduction of existing positions in the United States or in the dollar. He added that the dollar remains a “reference currency.”
Expectations of higher rates
The UBS chief also expects inflationary pressure to persist and interest rates to remain high in the near term. He suggested that the European Central Bank, the U.S. Federal Reserve and the Bank of Japan may raise rates over the coming months.
