UBS Global Wealth Management has recommended that clients sell stocks due to concerns that the latest escalation in the ongoing trade war between the US and China could threaten global markets.
The world’s largest wealth manager cut its core equity recommendation to “underweight” after US President Donald Trump increased tensions between the two countries as he announced a round of tariff hikes on Chinese goods.
Read more: Trump: China ‘wants a deal very badly’
In a note to clients on Sunday evening UBS Global Wealth Management chief investment officer Mark Haefele wrote: “The US-China trade dispute has escalated in recent days, raising the risk of a cycle of retaliation that undermines global growth and equity markets.
“That justifies a reduction in risk in our portfolios in order to lower our exposure to an uncertain political environment.”
On Friday, Trump said he would raise levies on $250bn (£204.5bn) of Chinese goods to 30 per cent from 1 October and increase tariffs on $300bn of Chinese goods from 10 per cent to 15 per cent in September.
However, speaking at the G7 world leaders’ summit in France today Trump said: “We are having very meaningful talks, much more meaningful I would say than any time frankly.”
Haefele said: “We estimate the direct impact of all the additional tariffs will represent only a marginal drag on the US economy.
“But downside risks are increasing for both the global economy and markets.
“As a result, we are reducing risk in our portfolios by moving to an underweight in equities to lower our exposure to political uncertainty.”
He added that UBS is “not bracing the portfolio for a traditional recession or the next Great Financial Crisis”.
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