UBS urged investors to review and rebalance their holdings following the strong run in global equities, warning that heavy exposure to a small number of U.S. technology giants has increased concentration risk across many portfolios.
The S&P 500 posted a new record close on Friday, bringing its year-to-date gain to more than 10%. Investor sentiment was boosted by reports that Washington and Tehran were nearing a framework deal that could pave the way for the reopening of the Strait of Hormuz.
Globally, the MSCI All Country World Index has advanced 10.9% this year. UBS left unchanged its forecast for the S&P 500 to end the year at 7,900, supported by an expectation of 20% growth in corporate earnings per share.
Although the bank remains constructive on equities, it expects future market performance to become less dependent on mega-cap technology names. UBS believes leadership is likely to broaden, with investors rotating into different sectors and regions while volatility increases as capital flows shift.
To reduce concentration risk, the bank pointed to opportunities in Japan, China, emerging markets, Switzerland, health care and European consumer discretionary shares. UBS also emphasized that artificial intelligence-related investment is increasingly benefiting infrastructure projects, power networks and industrial suppliers in addition to the major technology companies currently in focus.
UBS noted that “the recent bond sell-off has created an opportunity to lock in attractive yields,” particularly in high-quality government debt with short- to intermediate-term maturities. The bank argued that investors may be overestimating the likelihood of tighter monetary policy from major central banks.
Looking ahead, UBS said uncertainty remains around the ultimate winners of the AI boom, warning that “it remains unclear which companies will emerge as leaders in monetizing AI.” As a result, investors could face continued volatility even after a strong earnings season across the sector.
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