UBS House View

UBS House View

Investment Strategy Guide: Nostalgia is not an investment strategy

February 2026 | Chief Investment Office GWM | Investment research

In this report

04 Monthly Letter 16 Messages in Focus 18 Asset allocation implementation 20 US economic outlook 22 Equities 23 US equities 24 Bonds 26 Commodities 27 Foreign exchange February

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2 UBS House View | February 2026

Publisher

UBS Financial Services Inc.

CIO Global Wealth Management 1285 Avenue of the Americas 12th Floor

New York, NY 10019

This report was published on 23 January 2026

Lead authors Mark Haefele Ulrike Hoffmann-Burchardi

Authors (in alphabetical order) Jason Draho

Leslie Falconio Wayne Gordon Michael Gourd Paul Hsiao

David Lefkowitz Nadia Lovell

Barry McAlinden Dominic Schnider Frank Sileo Giovanni Staunovo

Cover image UBS

Editors

Jess Hoeffner Steven Faucher Laura Amoroso Aaron Kreuscher

Project management John Collura

Shawn Awan Samantha Infantino

Design

John Choi

Helena Powers Cheryl Seligman Sunil Vedangi

ClO Content Design

Dear reader

The New Year has begun with a wave of significant developments, from sweeping White House policy proposals to consequential geopolitical events, shaping the outlook for markets in the months ahead. Despite this, we remain confident in the outlook for US equities. Following three years of strong gains averaging 23% annually, the S&P 500 has further room to run, in our view, sup- ported by resilient economic growth, an accommodative Federal Reserve, and the continued adoption of artificial intelligence.

Fiscal stimulus from the One Big Beautiful Bill Act is set to boost

household incomes in the first half of the year. Meanwhile, con-

tained tariff-related inflation pressures and the delayed impact of 2025 rate cuts should further stimulate economic activity.

On the macro front, while there is some risk that the timing of Fed easing could shift to the summer, our base case calls for a 25-basis-point rate cut by the end of the first quarter, which should also provide a favorable backdrop for equities.

Al remains a key driver of market performance, but we see the invest- ment narrative broadening beyond infrastructure as we enter the fourth year of the Al supercycle. The focus is shifting from the enabling layer to the application and intelligence layers, where mon- etization and operational discipline are becoming key differentiators.

Ulrike Hoffmann-Burchardi Chief Investment Officer Americas and Global Head of Equities

UBS Global Wealth Management

Follow me on LinkedIn linkedin.com/in/ulrike-hoffmann-burchardi-ubs

Dear reader

Against this backdrop, market breadth looks poised to improve rela- tive to recent years, so we are upgrading the consumer discretionary sector to Attractive, as companies in this space stand to benefit from fiscal stimulus and potential housing market improvements under the Trump administration. We've also raised our 2026 S&P 500 EPS estimate to USD 310 (+12% growth) and maintain our June and year-end S&P 500 price targets of 7,300 and 7,700, respectively.

In fixed income, 2025 was a strong year, with most assets outper- forming cash. While we do not anticipate significant price appreci- ation by the end of 2026, we recommend high-quality fixed income, as it continues to offer attractive income and a buffer against potential economic or equity market weakness. We've also upgraded emerging market bonds to Attractive given their appeal- ing yields, improving fundamentals (external balances and ratings), and a supportive macro backdrop. Moreover, record supply in investment grade credit has been met with even stronger demand, allowing the IG index to tighten by 4bps year to date. Notably, gold and other precious metals have reached new record highs, driven by ongoing economic concerns and expectations of further rate cuts, as investors seek perceived “safe haven” assets.

As always, we recommend speaking with your UBS Financial Advisor to determine how these views align with your broader financial plan.

oe

Ulrike Hoffmann-Burchardi

POTUS 47

Investing under Trump 2.0

Visit ubs.com/potus47, a dedicated website tracking ongoing policy developments and the implications for the economy and financial markets.

February 2026 | UBS House View 3

Monthly Letter

Nostalgia is not an investment strategy

A new world

We live in a world where the rivalry between major powers is growing, geopolitical risks are rising, and governments may play a bigger role in markets.

A broader rally

Tactically, we expect the evolving Al innovation cycle and the robust economic backdrop to support a continued broadening of the equity rally.

A diversified approach

Strategically, we believe diversification across regions and asset classes is all the more important in a polarized world, where risks are higher and outcomes less predictable.

Asset allocation

We rate equities as Attractive, and like the US, Europe, China, and Japan. We like quality bonds, and upgrade emerging market bonds to Attractive. We also favor gold.

-_

b

Mark Haefele Global Chief Investment Officer Wealth Management

Follow me on LinkedIn linkedin.com/in/markhaefele

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To paraphrase Canadian Prime Minister Mark Carney’s Davos speech, we live in a world of increasing Great Power rivalry. Nostalgia for the old international order is not an invest- ment strategy.

So what is?

With political slogans dominating the headlines, it feels only fitting to borrow from the rhetorical toolkit of the day. So in the remainder of this letter, I’ll discuss why we believe that tactically, it is time for “One Big Beautiful Broadening”—where market leadership expands beyond a handful of stocks. Strategically, it is time to “Make Portfolios Diversified Again.”

The US administration’s new “Donroe Doctrine,” strained relations between China and Japan, violence in Iran, and fractures within the NATO alliance over the future of Greenland and Ukraine all point to a more volatile world, with geopolitical blocs seek- ing greater strategic autonomy.

Meanwhile, the Trump administration's heightened focus on “affordability” —including potential regulation of credit card rates and intervention in the mortgage and real estate markets—and questions about the future direction of fiscal and monetary policy around the world have also drawn investor attention.

For governments everywhere, the challenge of funding strategic autonomy and delivering on voters’ priorities—despite aging populations, rising electricity demand, resource scar- city, and labor market disruptions—will ensure that debates over fiscal and monetary pol- icy, as well as rising government intervention in markets, remain prominent features of the investment landscape for years to come.

We recommend that investors broaden their equity market exposures.

The equity rally in recent years has been led by a handful of Al-linked stocks.

Monthly Letter

In the near term, we believe it’s important not to overreact to political headlines. We retain a positive stance on markets as resilient economic growth, low or falling interest rates, and structural tailwinds from artificial intelligence should all provide support and more than offset the volatility, in our view.

To position for further upside potential, we recommend investors broaden market expo- sures. The bull market so far has seen relatively concentrated gains favoring a few “Al lead- ers.” From here, we expect growth-friendly policies in the US to lift cyclical sectors and Al trade leadership to shift from the “enabling layer” to the “application layer.” Beyond US stocks, we also see appealing and reasonably valued opportunities in Asia and Europe.

Strategically, we think geopolitical polarization and government intervention in markets increases the imperative to diversify. While there will be some outperformers from these trends, they will also heighten risks for certain countries, sectors, and companies. And because governments picking winners and losers in markets can lead to a wider range of outcomes, the changing environment underscores the importance of building well- diversified core portfolios, incorporating effective portfolio hedges, and taking a thoughtful approach to currency allocation.

“One Big Beautiful Broadening” for stocks

The equity rally of recent years has been narrow. In the US, the so-called “AI7”' have dominated returns, appreciating roughly 200% over three years—about five times the gain of the rest of the S&P 500.

Figure 1 The equity market rally in recent years has been concentrated

Percentage of S&P 500 companies that outperformed the index

1985 1995 2005 2015 2025

— _ Average

Sources: Bloomberg, FactSet, UBS, as of January 2026

1 This group (NVIDIA, Broadcom, AMD, Micron, Alphabet, Amazon, and Microsoft) overlaps with but is not the same as the Magnificent 7.

February 2026 | UBS House View 5