Sergio Ermotti, Chief Executive Officer of UBS, warned that investors in financial markets have become too complacent about risk, even as geopolitical and economic risks continue to mount. In an interview with CNBC, he said markets should be far more volatile than they are now, even though heavy investment in artificial intelligence, data centers and new technologies is still helping to support economic and market growth. Ermotti pointed to pressure from the wars in Iran and Ukraine affecting energy and shipping, competition between the United States and China weighing on supply chains, and higher borrowing costs and still-elevated inflation. As a result, UBS's wealthy clients are spreading their portfolios across more industries and regions, though overall asset allocation has not changed significantly over the past year, and this does not mean investors are making a mass exit from US assets. Some of the money that flowed into emerging markets about a year ago was mostly excess cash being put to work, rather than selling US assets or reducing dollar holdings. Ermotti expects the European Central Bank to begin a rate-hiking cycle, with the US Federal Reserve to follow, and the Bank of Japan likely to raise rates as well. He expects roughly two more rate hikes in the coming months, which means investors should not expect borrowing costs to quickly return to the low levels seen before the recent bout of inflation pressure.
UBS Group AGUBS CEO Ermotti warns markets are too complacent and expects further Fed, ECB and BOJ rate hikes, a macro-rate view affecting the bank's outlook.
