Risk rally is set to continue, UBS says

The recent rally in risk has been breathtaking but is likely set to continue, according to one of the world’s biggest investment banks.

The rebound in financial assets has been notable for its “speed, magnitude, and breadth”, UBS strategist Daniel Waldman said.

However, so long as markets can rely on policymakers to remain accommodative, to respond to “significant weakness” with easier policy and the slowdown in global growth does not become too acute, then the rally will continue, Waldman said.

The rally came after US data, subdued inflation and tighter financial market conditions led markets to reassess the outlook for monetary policy, while investors’ pessimism had left many assets cheap.

The biggest risk was that investors came to expect too much from central banks, the strategist said.

“Recent communication from the Federal Reserve leadership kept a 2015 lift-off alive, even after the run of weaker data.”