<p>Recently, the UBS Wealth Management department, which gathers high-net-worth clients globally, had its Chief Investment Officer send a letter to clients addressing current market hot topics.</p><p>As a buy-side department of an investment bank, UBS Wealth Management focused on answering questions about global liquidity issues, country selection for equity assets, and views on holding cash in the letter.</p><p>Zhi Shi Tang summarizes the key points of this letter as follows for readers.</p><h2>The U.S. Easing Cycle Is Not Over</h2><p>Although the Federal Reserve is currently pausing interest rate cuts, we believe this does not signify the end of the U.S. easing cycle. According to the CIO, Trump's aggressive tariff policies may hinder economic growth, thereby accelerating this easing process. Meanwhile, the global rate-cutting cycle continues, with the Swiss National Bank recently implementing rate cuts, and the European Central Bank is likely to follow suit.</p><p>The decline in borrowing costs may make borrowing strategies more attractive as a tool for managing liquidity, diversifying portfolios, enhancing returns, and avoiding improper asset sales. With careful consideration of the associated risks, borrowing strategies can become part of prudent financial planning.</p><h2>The Importance of Chinese Stocks Is Rising</h2><p>In the coming weeks, as the market assesses the latest tariff news and its impact on economic growth, inflation, and monetary policy, volatility may remain high.</p><p>With the easing of tariff policies, potential interest rate cuts by the Federal Reserve, and market focus shifting towards the prospects of earnings growth in 2026.</p><blockquote><p>We continue to be optimistic about structural growth themes (including artificial intelligence, energy and resources, and the longevity economy). In Asia, we favor a defensive investment strategy centered around state-owned enterprises in mainland China.</p></blockquote><h2>Do Not Exit Risk Assets</h2><p>We tend to increase the stabilizing factors in the portfolio rather than exit risk assets. Investors can consider various ways to enhance portfolio resilience, such as reasonable diversification, including allocations to hedge funds and investments in gold.</p><p>In times of high volatility, structured strategies, including capital preservation strategies, should be considered. However, despite facing resistance, we still find the artificial intelligence theme attractive.</p><p>The growth trend in electrification demand related to artificial intelligence, electric vehicles, and decarbonization is expected to continue. Diversifying investments in stocks of electrical equipment, materials, and utility sectors, as well as investing in private markets for data centers and energy transition infrastructure, holds value.</p><h2>Cash Is &#34;Not Safe&#34;</h2><p>While cash may feel &#34;safe&#34; during stock market declines, in the long run, cash underperforms other assets. Reasonably allocating excess cash and seeking stable income should be the strategic focus for investors.</p><p>In the current market volatility and rising risks of economic recession, government bonds and investment-grade bonds are particularly attractive. Long-term investors may consider diversifying fixed-income investments, preferred loans, private credit, equity income strategies, and structured strategies as sources of income</p>

<p>Favoring a defensive investment strategy centered on state-owned enterprises in mainland China</p>

- UBS Wealth Management's Chief Investment Officer addressed key market issues in a recent letter to high-net-worth clients, emphasizing that the U.S. easing cycle is not over despite the Fed pausing rate cuts.  
- The letter highlights the increasing importance of Chinese stocks and suggests that investors should not exit risk assets but rather enhance portfolio resilience through diversification and structured strategies.  
- It also warns that while cash may seem "safe" during market downturns, it underperforms other assets in the long run, advocating for a focus on government bonds and diversified fixed-income investments.

UBS Wealth Management Client Letter: Do Not Exit Risk Assets, Cash is "Not Safe"