Investing.com — Investors should avoid waiting for perfect market conditions and consider moving surplus cash into diversified portfolios, despite major equity indexes trading near record highs, UBS said in a strategy report.
UBS said geopolitical tensions, inflation, uncertain interest rates, elevated valuations and questions about the durability of artificial intelligence spending provide legitimate reasons for caution. Yet delaying investment until risks disappear could leave long-term capital underinvested.
An analysis of the past 30 years found that U.S. stocks typically generated comparable or higher returns in the year after reaching record highs. UBS also said the effect of geopolitical events on markets has often been temporary, with attention returning to economic and corporate fundamentals.
The bank expects global corporate earnings to grow around 21% in 2026, supported by resilient economic activity and profit growth spreading beyond a small group of technology companies.
Cash remains appropriate for near-term spending, taxes and planned commitments, UBS said. Falling deposit rates and inflation can erode its long-term purchasing power, making large excess balances less effective for meeting longer-term goals.
Investors could lock in current bond yields for capital needed over shorter periods and deploy remaining cash either immediately or gradually. Phased investment may reduce the behavioural risk associated with entering markets near record highs, though UBS said it does not guarantee better returns.
Diversification is particularly relevant as many investors hold concentrated portfolios. Nearly 40% of self-directed equity investors on UBS’s platform hold more than half their equity allocation in ten stocks or fewer.
UBS recommended spreading exposure across equities, quality fixed income, infrastructure and selected alternative assets. It also identified AI, power and resources, longevity, China, Japan and emerging markets as long-term themes.
Investment-grade credit, high-yield debt and emerging-market bonds can provide income, with shorter-maturity bonds offering some protection if equity volatility rises.
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