UBS is advising investors in the Gulf Cooperation Council (GCC) to invest in high-grade bonds and diversify their portfolios internationally to safeguard their wealth against regional geopolitical risks. Michael Bollinger, UBS’s Chief Investment Officer for Global Emerging Markets, made these recommendations during a recent media roundtable focused on emerging market investments.
Bollinger emphasized that hedging strategies, such as including gold and oil in portfolios, could add an extra layer of protection for GCC investors’ assets. UBS research shows that emerging market bonds have historically performed well in the months following an initial U.S. Federal Reserve rate cut, a trend that continued with the Fed’s recent decision to ease policy. “We expect EM bonds to benefit from loosening global financial conditions and stable global growth, despite possible short-term volatility from geopolitical factors,” Bollinger noted.
As tensions rise between Israel and Iran, alongside Israel’s recent conflicts involving Lebanon and Gaza, Bollinger acknowledged that investor sentiment in the Middle East remains cautious. However, he expressed confidence that the situation would not escalate into a regional conflict, provided oil flow remains uninterrupted.
“In terms of oil prices, GCC investors are already highly exposed to market changes. It may be wise to consider alternatives like high-grade bonds with longer durations, which could offer stability if oil exports were to face disruptions,” Bollinger explained. He also recommended gold as an effective hedge for portfolios, given its historical reliability during times of increased geopolitical risk.
Bollinger cautioned that the U.S. presidential election is likely to add further volatility to global markets in the coming weeks. He noted a tight race, with UBS analysts seeing a 95% chance that Republicans will take control of the Senate and a 60% likelihood of a divided government. However, Bollinger urged investors not to make drastic portfolio changes in anticipation of the election outcome, noting that, “We believe positive equity market fundamentals are resilient, regardless of the election result.”
