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UOB Risk-First Approach

The uneven pace of economic recovery across various regions can result in market volatility even as economies reopen. Our proprietary Risk-First approach can help smoothen the ride for investors – Optimal portfolios are recommended in accordance with your risk profile, with a maximum of 20%, 30% or 40% allocated to Tactical investing (which has higher risk), and the remainder in Core investing.

Risk-First Approach Risk-First Approach

Core Investing

Core solutions are relatively lower risk in nature, yet able to generate reasonable returns. They tend to be less volatile than the broader market in order to help clients meet their longer-term financial goals. An allocation to Core solutions helps to lower downside volatility – a much-needed outcome during this challenging period.

Short- to medium-duration investment grade bonds

Short- to medium-duration investment grade bonds

The defensive nature of these liquid bonds enables them to weather heightened volatility, giving investors greater portfolio stability. This asset type will also experience lower drawdowns when central banks eventually raise interest rates due to an inflation spike and/or accelerating economic growth.

Asian investment grade bonds

Asian investment grade bonds

This asset type offers a good balance between defensiveness and yield. With relatively higher yields (2.0% - 2.5%), compared with the broader global bond index (1.1%), and with spreads near their historical average (130 basis points), these bonds will benefit from the region’s earlier resumption of economic activity, while being able to absorb some of the negative impact of rising yields.

Global multi-asset strategies

Global multi-asset strategies

These strategies offer a flexible and diversified asset allocation to capture opportunities in a variety of market conditions and across various asset classes – including equities, bonds and alternatives. They can provide a mix of both income (historical 12-month yields in the range of 4.2% - 5.0%) and capital growth to meet an investor’s financial goals.

Tactical Investing

Tactical strategies are identified using our award-winning VTAR framework, which focuses on analysing financial data in the four components of Value, Trend, Activity and Risk (VTAR). The framework aims to provide a holistic view of financial markets and identify investment opportunities across asset classes, sectors, geographical regions and time periods.

Megatrends (3 to 5 years)
VTAR Legend

China

China

VTAR Rating

Onshore equity valuations are more attractive than broader global equities, while recent corrections have stabilised. Although ongoing geopolitical tensions and tighter domestic regulations may pose risks to growth, China’s dual-circulation model to boost its domestic market will support growing middle-class consumption and reduce reliance on exports for growth.

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Global Healthcare

Global Healthcare

VTAR Rating

Global healthcare valuations are attractive although price momentum has slowed. Further afield, technological innovations have accelerated drug developments and increased efficiency of care delivery, driving growth in the sector. However, political pressures over high costs and anti-competition measures can pose near-term risks to pharmaceutical companies.

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Sustainability

Sustainability

VTAR Rating

Despite slightly expensive valuations, support from governments, institutions and investors will continue to drive strong momentum in Sustainable Investing. Companies ahead of the sustainability curve will have an advantage. However, investors need to be careful of “greenwashing”, where companies may make unsubstantiated environmentally-friendly claims.

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US

US

VTAR Rating

An expected 36% earnings growth this year will justify elevated valuations on US equities, along with strong rising momentum and fund inflows. Robust fiscal spending will supercharge US economic growth, although potential tax hikes and unexpected inflation spikes may be detrimental to financial markets.

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AI & innovation

AI & Innovation

VTAR Rating

Digitalisation has accelerated AI development and implementation, with widespread use of AI-enabled technologies expected to improve productivity over a multi-year period. However, risks could come in the form of policy and regulatory uncertainties as various countries seek to tighten controls on the uses and applications of AI technology.

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High Conviction Calls
(6 to 12 months)
VTAR Legend

Asia ex-Japan Equities<

Asia ex-Japan Equities

VTAR Rating

Valuations are slightly expensive compared to the historical average, but strong 31% earnings growth expectations, improving price momentum and higher fund inflows are positive drivers. A weaker USD will benefit this trade-oriented region, although China’s regulation tightening and geopolitical tensions with the US and Europe are potential flashpoints.

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European Equities

European Equities

VTAR Rating

European equities historically lag the US and are slightly more expensive than their historical average. Delayed by COVID-19, the economic recovery is gaining speed, buoyed by supportive EU monetary and fiscal policies. Well-positioned for structural growth, value-oriented European companies are outperforming globally, with an expected 50% rebound in earnings this year.

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US Financial Equities

US Financial Equities

VTAR Rating

This sector is more attractively-valued than the broader US equity market, especially with a 58% increase in earnings this year. The strong and positive price momentum is supported by higher long-term interest rates and improving fee income. However, any deterioration of the economy can hinder loan growth if bankruptcies increase.

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Global Equities with High Quality Factors

Global Equities with High Quality Factors

VTAR Rating

As the global economy recovers, companies with superior business models should thrive with 18% expected earnings growth in 2021. Although valuations are stretched relative to their historical average, these are supported by higher earnings. Possible risks include sudden interest rate spikes and a potential increase in US taxes.

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VTAR Framework