Trade with Greece
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ments, some exposure to commodities, including
gold, is advisable.
There is also preference for the dollar, especially
against the euro, as well as emerging market cur-
rencies, despite their low exposure to money mar-
ket funds. Growth remains a priority for China, sup-
porting commodity prices. This also indicates that
those hoping for a substantial revaluation of the
Yuan, e.g. above 5%, may get disappointed.
Increased investor interest is expected for stocks,
with those offering “safe” dividends and growth
prospects appearing to be rather attractive.
Next year we may see a developed economy
going into default or debt restructuring. The crisis
in Europe has by no means ended, as the
economies of the European periphery struggle to
stabilize their debts.
Countries such as Greece have still a lot to do in
order to ensure the sustainability of their public
finances. Austerity measures will not yield the
desired results so long as growth remains feeble.
It is very possible to see some countries
announce the restructuring, or stretch out the
repayment, of their debts in order to return to a
sustainable path. Moreover, the possibility of the
austerity measures triggering a political crisis
means that this might happen sooner than later.
UBS
In general, the environment for the majority of
risk-bearing assets, including stocks, is expected
to remain favourable throughout 2011. Some
volatility cannot be ruled out, along with possible
upward surprises.
Fixed income markets appear to be less attractive,
and government bonds will probably underperform.
In contrast, real estate stocks, as well as the local
currency-denominated debt securities of emerging
economies, are expected to outperform the market.
The prospects for most commodities remain posi-
tive, given strong demand and limited supply.
However, if there is any positive surprise regarding
the growth rate of the US economy, which will
strengthen the dollar, then both gold, and other
commodities, should be expected to underperform.
On the other hand, and despite the fact that the
debt crisis has been confined to a subset of small-
er Euro zone economies, if a larger economy,
such as Spain, asks for help, then the determina-
tion and ability of the other members, as well as
the IMF, will be seriously tested. This is a scenario
that brings forth the possibility of uncontrolled
default and exit from the Euro zone, with adverse
consequences for stocks worldwide, especially in
the financial sector, providing, at the same time, a
boost to “safe havens” such as gold.
