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Investors are \u201cselling America\u201d in spades Tuesday: The 10-year Treasury yield is at its highest point since August; the U.S. dollar slid; and the traditional safe-haven metal investments\u2014gold and silver\u2014surged once again to record highs.<\/p>\n
The CEO of UBS Group, the world\u2019s largest private bank, thinks this market is making a \u201cdangerous bet.\u201d<\/p>\n
\u201cDiversifying away from America is impossible,\u201d UBS Group CEO Sergio Ermotti told Bloomberg in a television interview at the World Economic Forum in Davos, Switzerland, on Tuesday. \u201cThings can change rapidly, and the U.S. is the strongest economy in the world, the one who has the highest level of innovation right now.\u201d\u00a0<\/p>\n
The catalyst for the selloff was fresh escalation from U.S. President Donald Trump, who has threatened a 10% tariff on eight European allies\u2014including Germany, France, and the U.K.\u2014unless they cede to his demands to acquire Greenland.<\/p>\n
Trump also threatened a 200% tariff on French wine and Champagne to pressure French President Emmanuel Macron to join his Board of Peace. Trump\u2019s favorite \u201cMr. Tariff\u201d is back, and bond investors are unhappy with the volatility.<\/p>\n
But if investors keep getting caught up in the chaos of day-to-day politics and shun the U.S., they\u2019ll miss the forest for the trees, Ermotti argued. While admitting the current environment is \u201cbumpy,\u201d he pointed to a statistic: Last year alone, the U.S. created 25 million new millionaires. For a wealth manager like UBS, that is 1,000 new millionaires a day. To shun that level of innovation in U.S. equities for gold would be a shortsighted move that ignores the long-term innovation of the U.S. economy.\u00a0<\/p>\n
\u201cWe see two big levers: First of all, wealth creation, GDP growth, innovation, and also more idiosyncratic to UBS is that we see potential for us to become more present, increase our market share,\u201d Ermotti said.\u00a0<\/p>\n
But if something doesn\u2019t give in the standoff between the European Union and Trump, there could be potential further de-dollarization, this time, from Europe selling its U.S. bonds, George Saravelos, head of FX research at Deutsche Bank, wrote in a note Sunday. Indeed, on Tuesday, Danish pension funds sold $100 million in U.S. Treasuries, allegedly owing to \u201cpoor\u201d U.S. finances, though the pension fund\u2019s chief said of the debacle over Greenland: \u201cOf course, that didn\u2019t make it more difficult to take the decision.\u201d\u00a0<\/p>\n
Europe owns twice as many U.S. bonds and equities as the rest of the world combined. If the rest of Europe follows Denmark\u2019s lead, that could be an $8 trillion market at risk, Saravelos argued.\u00a0<\/p>\n
\u201cIn an environment where the geo-economic stability of the Western alliance is being disrupted existentially, it is not clear why Europeans would be as willing to play this part,\u201d he wrote.\u00a0<\/p>\n
Back in the U.S., the markets also sold off as the Nasdaq and S&P both fell 2% Tuesday, already shedding the entirety of Greenland\u2019s value on Trump\u2019s threats, University of Michigan economist Justin Wolfers noted. Analysts and investors are uneasy, given the history of Trump declaring a stark tariff before negotiating with the country to take it down, also known as the \u201cTACO\u201d\u2014Trump always chickens out\u2014effect. Investors have been \u201cburnt before by overreacting to tariff threats,\u201d Jim Reid of Deutsche Bank noted. That\u2019s a similar stance to the UBS bank chief: If you react too much to headlines, you\u2019ll miss the great innovation that\u2019s pushed the stock market to record highs for the past three years.<\/p>\n
\u201cI wouldn\u2019t really bet against the U.S.,\u201d he said.<\/p>\n<\/div>\n
#Selling #America #dangerous #bet #UBS #CEO #warns #markets #panic<\/p>\n","protected":false},"excerpt":{"rendered":"
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