Banking giant UBS reveals: The mistake you are making in your investment portfolio

The daily market review from UBS, published on Tuesday, points to continued positive momentum in global markets and presents the key factors behind recent gains. Alongside the recommendation to remain exposed to the stock market, the bank emphasizes the importance of investment diversification, especially for investors who have concentrated a significant portion of their portfolio in American technology.

In the week ending August 7, sharp gains were recorded in the US market. The Nasdaq 100 index strengthened by 5.1%, while the S&P 500 and the Russell 2000 index rose by 3.5%. The gains were led, among others, by artificial intelligence chip manufacturers, cloud companies, and communication giants. At the same time, the yield on the 10-year US government bond fell by almost 10 basis points from the peak recorded at the end of July, to a level of 4.70%.

UBS notes that the gains are not based solely on market optimism. 87% of S&P 500 companies that published results beat profit forecasts, while the median growth in profits for Russell 3000 companies reached 15%, the highest pace since 2021. Europe has also seen strong performance over the last three years, and in Asia, excluding Japan, significant growth of 72% in company profits is expected, partly due to demand for computer hardware needed for the development of artificial intelligence systems.

The interest rate environment also supports relative optimism. The weakening of the US labor market reduces the likelihood of further monetary tightening by the Federal Reserve, with UBS estimating that the base scenario is for US interest rates to remain unchanged this year.

In the geopolitical arena, there has also been a development that may reduce the level of risk. Progress in diplomatic contacts between the US and Iran, according to UBS, reduces concerns about immediate escalation and strengthens the possibility of a gradual recovery in energy flows in the Strait of Hormuz region.

Regarding investment strategy, UBS recommends remaining invested in stocks but warns against over-concentration in American technology. According to the bank, the current market strength may allow investors to rotate and diversify exposure towards Europe, Asia, and selected cyclical sectors.

At the same time, the bank recommends taking advantage of current yield levels to lock in yields on high-quality bonds with short to medium duration. Alongside this, high-yield bonds and debt in emerging markets can also be included in a controlled manner. UBS additionally recommends a combination of broad commodities and capital protection strategies, with the aim of strengthening the resilience of the investment portfolio.

One of the central topics in the review is the Japanese yen. The currency returned to a level of about 159.2 yen to the dollar, after erasing about half of the strengthening recorded following the joint intervention of the US and Japan. UBS estimates that the intervention did not change the structural factors weighing on the yen, including a negative real interest rate in Japan and the expectation that the Japanese central bank will normalize policy only at a slow pace.

Accordingly, UBS forecasts that the dollar-yen exchange rate will be 162 in September 2026, 160 in December 2026, and 158 in March and June 2027.

The overall picture presented by the bank is of a market receiving significant support from business results, the easing of interest rate concerns, and the reduction of geopolitical risks. However, precisely against the backdrop of sharp gains, UBS emphasizes that this is a stage where risk management and geographical and sectoral diversification become especially important.