5 ways investors should position their portfolios for the coming months, according to the world's largest wealth manager

  • Mark Haefele — chief investment officer at UBS Wealth Management, which oversees $1.4 trillion in assets — highlighted five ways investors can position their portfolios for the uncertain months ahead.
  • While the timeline for a vaccine is unknown, Haefele expects an economic recovery next year and said now is the time for investors to pivot into stocks that will benefit.
  • He also said that opportunities can be found in gold and sustainable investments.
  • Investors waiting for a large correction to dive into the market may be disappointed, Haefele said, especially if a vaccine is announced sooner than expected.
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With a blurred vaccine timeline and uncertain US election ahead, portfolio construction can be intimidating.

But Mark Haefele — chief investment officer at UBS Wealth Management, which oversees $1.4 trillion in assets — says investors holding cash on the sidelines and waiting for a large correction "run the risk of disappointment," particularly if a vaccine arrives sooner than expected.

In a recent note to clients, Haefele broke down five pro-active measures investors can make now to position portfolios for coming months.

(1) Take advantage of upcoming volatility 

Although Haefele expects near-term volatility, he's confident about the longer-term trajectory for the economy and said that investors should "put excess cash to work straight away."

Cautious investors can use near-term volatility to build up positions for the long term. This can be done through a "disciplined phasing-in strategy," or through options or structured solutions.

Read more: A 'disturbing new all-time low' in the market just flew under the radar as stocks hit record highs — and one Wall Street expert warns it implies years of bleak returns for young investors

(2) Position for a rotation into values and cyclical stocks 

The economic rally will broaden beyond the growth and mega-cap tech names that have dominated the market recently, said Haefele.

While he said the timing of the rally is uncertain, he thinks now is the right time for investors to look to position into areas like US mid-caps stocks, emerging-market value stocks, and global industrials. 

(3) "Hunt for yield"

Investors will need to work especially hard to find yield in an environment of record-low interest rates. One strategy is to seek income generation with high-dividend paying stocks, said Haefele.

Outside of equities, Haefele said US dollar-denominated emerging-market sovereign bonds, green bonds, and Asian high-yield bonds provide opportunities for yield.

Read more: Legendary options trader Tony Saliba famously put together 70 straight months of profits greater than $100,000. Here's an inside look at the strategy that propelled him to millionaire status before age 25.

(4) Find opportunities in commodities

Haefele also said that broad commodity indexes will rise in the months ahead, and cyclical commodities will rise as the economy begins to recover. He added: "Gold also continues to look attractive in a portfolio context in an environment of negative real interest rates and elevated geopolitical uncertainty."

(5) Invest in sustainability 

As economies recover from the pandemic they will spend more on "green initiatives," said Haefele. Investors can gain exposure to sustainability by investing in multilateral development bank or green bonds, or investing in stock themes that align with the UN Sustainable Development Goals, he added.

Read more: Jefferies handpicks the 17 best stocks spanning multiple sectors to buy now — and details why each company's future looks 'particularly attractive,' even in a downturn

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