Friedman mentioned Federal Reserve Chairman Ben S. Bernanke’s news conference scheduled for later that day.
“It’s going to give him some good ammunition to fight off the hawks if he points to Cyprus,” Friedman said. “Good for the markets in a counterintuitive way.”
The Fed later decided to leave the pace of asset purchases unchanged, as Bernanke said further gains in the U.S. labor market are needed for the central bank to consider reducing its record monetary easing.
‘Front Wheel’
UBS recommends that clients allocate more funds to U.S. stocks than those from other regions, and when Friedman’s monthly letter to client advisers comes out the next evening he compares market dynamics to a tricycle.
“The U.S. is the front wheel, powering the market, and China and the euro zone provide somewhat wobbly traction on the sides,” Friedman wrote.
The Standard & Poor’s 500 index, which tracks U.S. stocks, has gained 1.9 percent since the CIO’s letter came out on March 21, while the Stoxx Europe 600 Index fell 2.1 percent and the MSCI Asia Pacific index added 0.9 percent.
UBS takes a view on every asset class, in all regions, with price or yield targets over a six-month horizon. The reasons for calls and the views of everyone participating in the process are documented and tracked for transparency purposes. Apart from the recommendation on U.S. stocks, UBS currently advises clients to underweight government bonds in favor of emerging-market and investment-grade corporate bonds, as well as high-yield notes. The bank recommends the British pound over the euro.
Friedman’s views are directly implemented for more than $100 billion in assets the bank manages for clients on a discretionary basis. Those mandates are typically among the most profitable for the bank, with annual fees of about 1 percent and low operating costs because of scale. UBS said it had more months with net positive inflows into discretionary mandates in 2012 than in any of the previous three years amid withdrawals by cross-border European clients.
To make sure other clients benefit equally from the CIO’s recommendations, UBS is educating advisers and developing a new offering called UBS Advice. Customers would be charged a fixed flat fee for advisory services and automated daily checks of their portfolios against their risk profiles and the bank’s market views. Making advice on investments more consistent may make UBS more attractive, Scorpio’s Dovey said.