In this edition of Panorama, our Contents investment experts recap on the past investment year and explore where the challenges, opportunities and surprises 01 Calm waters turn choppy might spring from. Barry Gill introduces the latest edition of Panorama The following pages offer distinct 02 A longer late-cycle viewpoints and investment insights Calm waters turn choppy across our global capabilities. How will US Federal Reserve decisions impact markets? For additional content and previous 06 Will the 60/40 portfolio rise from the ashes? editions of Panorama, including videos The multi-asset team discuss their outlook Investors have endured a tough year. Barry Gill, Head of Investments, and additional in-depth investment for this portfolio approach UBS Asset Management, introduces the year-end edition of insight, visit ubs.com/panorama or 10 Reasons to look at fixed income again Barry Gill Panorama and discusses the issues facing investors over the scan the below QR code. Head of Investments months ahead. The opportunities now that more of the market yields in excess of 2% For marketing purposes For global professional / qualified / institutional clients and investors and US retail Panorama clients and investors. 14 Equity long-short alpha: a new paradigm? Mid-year outlook 2022 | UBS Asset Management Bernie Ahkong gives his outlook for this hedge fund approach. What a tumultuous period this After so many years of tech dominance, will investors finally Inflation: rising has been. It seems as if we find an appreciation for other types of equities? Will equities to the challenge 16 What next for central bank policy? Wow!h ave been riding a tidal wave of have to look a little like bonds to be attractive? Could dividend The challenges facing global central banks in 2023: the unexpected since 2020; one that (hopefully?) reached a yields be back? Time will tell, but what is certain is that these Will they be able to stick with their current approach? crescendo this year. Having enjoyed such calm waters for many types of rotations in the equity markets can create wonderful 20 Why UBS Asset Management years, we are now being challenged to imagine a world where alpha opportunities, particularly where the institutional mix of unpredictability features permanently. Somewhat ironically, our shareholders is low. Our O’Connor hedge fund team examines list of potential items that investors may not be prepared for in how they aim to identify alpha in a period when generating it the year ahead, feels more mainstream than in prior years; but is likely to need to take on a more meaningful contribution to that is likely a function of a change in our perception of what is equity returns than over the past decade. 02 The end 04 High inflation Climate 18 Hedge funds of the = Lower growth 12 transition and as a diversifier | ‘NICE’ years | | value investing | within the bounds of normal. Bull markets are typically born when investors ignore good As we entered this year it looked like the historic diversification news, but the fear of missing out (FOMO) seems alive and well. benefits of the traditional 60/40 portfolio might come unstuck This suggests there is more pain to go before markets are really as inflation started to take hold. Few could have quite imagined investible again. It feels like more stuff needs to break. Warren the extent to which this would materialize – equities at one Buffett colorfully mused that it is only as the tide goes out that point were squarely in bear market territory, while bonds you find out who has been swimming naked. Today’s tide is the experienced the biggest sell-off since 1994. The question now rapid rise in interest rates to combat inflation. Where will the is what happens going forward? Have valuations reset enough weaknesses in the markets be exposed? At the time of writing and is there enough yield in bonds to make the 60/40 mix elements of the crypto market are in turmoil. What will be next? appropriate again. We explore this in our latest Panorama. Could yield curve control be abandoned in Japan, and what would that mean? This outcome is one of the more negative Notwithstanding the obvious debt-servicing challenges to surprises we speculate about in this edition of Panorama. households, companies and governments, we now have attractive coupons across the entire fixed income stack for the As always, our team is here to support you in your investment first time since the Great Financial Crisis 2007-2008. While journey and help you peer through the fog of uncertainty. credit spreads are not particularly wide, some investors may Publishing information: Panorama is released consider that yields are sufficiently high on short duration bonds Faithfully. bi-annually by UBS Asset Management that they don’t have to take a big bet on duration. Our team Editorial deadline: November 2022 examines where the best opportunities might be found. Barry Editors in-chief: Claire Evans Editor: Melanie Archer Design: Marie-Agnès Lajonie 1