Bank says the phenomenon may arise if conditions are realized, especially in highly valued sectors, such as technology
Analysts of warning to increasing the risks of a possible bubble in the stock market, as the income from government bonds rise, assigning 35% probability that this will be registered soon.
In a note published on Thursday (23.Jan.2025), the bank pointed out that a bubble may arise if certain conditions are realized, especially in highly valued sectors, such as technology.
Analysts indicate that, historically, “The p/l index (price/profit) of the areas associated with bubbles (which can represent up to 40% of market capitalization) reaches at least 45 times” when securities income rises to 5.5%.
Currently, the P/L index of the so -called “6 magnificent” technology companies is 34 times.
Or UBS mentions “Exceptionally solid position of corporate balance sheets (especially in the technology sector)” Compared to government finances as a factor that can support high evaluations, even with the increase of income.
The note also offers a detailed analysis of regional performance in scenarios of increased income from TIPS (Treasury Inflation-Protected Securities, US inflation protected titles).
UBS explains that Japan has historically been the region with the best performance in terms of local currency, while emerging markets with major current account deficits, such as Brazil, tend to perform lower dollars performance.
The bank recommends caution in relation to non -financial cyclic sectors, which, according to him, “They are pricing very high and negotiate with indexes p/l and p/s near records in relation to the defensive sectors”.
Instead, UBS demonstrates a preference for defensive actions with low financial leverage, highlighting companies such as Microsoft, Abbott, SAP, TESCO and BAE SYSTEMS.
For investors concerned with populist policies or inflation, UBS suggests “Position in actions of financial institutions such as protection against populism”.
European banks and life insurers in particular can benefit if inflation expectations increase.
With information from Brazil.
