Diversification and Targeted Asset Allocation Key Amid Middle East Conflict - UBS Analysts
As tensions rise between Israel and Hezbollah in Lebanon, UBS analysts recommend a strategy focused on diversification and targeted asset allocation to mitigate individual risks. While the global market impact of the conflict remains contained for now, further escalation involving Iran and the U.S. could disrupt energy supplies and increase financial volatility.
UBS emphasizes the importance of diversified portfolios to minimize exposure to specific risks while highlighting the benefits of staying invested in a supportive macroeconomic environment. Exposure to oil-related assets can act as a hedge against energy disruptions, especially with potential impacts on oil supply routes like the Strait of Hormuz.
Gold is also suggested as a valuable asset during geopolitical tensions, with prices expected to rise further due to factors such as anticipated rate cuts by the U.S. Federal Reserve and seasonal increases in jewelry demand. Analysts recommend including gold in portfolios as a safe haven during market uncertainty.
Maintaining exposure to high-quality credit assets is advised to provide stability amidst market volatility. Despite the weakening Israeli shekel and its impact on the country's fiscal outlook, global markets should focus on broader economic drivers if the conflict remains contained regionally.
In summary, diversification, targeted asset allocation, exposure to oil-related assets, gold, and high-quality credit assets are key strategies to navigate through geopolitical tensions and market volatility. By following these recommendations, investors can safeguard their portfolios and benefit from potential market opportunities during uncertain times.