UBS: Investors, It's Time to Get Back in the Game

In the last few months, advice from investment companies and brokerage firms and the like on when to “get back in the game” has flown hard and fast. We couldn't go much over a week without someone insisting that now was the time to “buy the dip”. Now, one more voice has kicked in, and it's looking a bit more forward than just buying certain stocks on a slight drop. UBS has come out and said that it's time investors “get off the sidelines” and get back to investing fully.

But What About The Various Dangers?

Admittedly, UBS is bringing out its rallying cry in the midst of a trainload of economic disasters, and other disasters that are ancillary yet still related. A lot of places are only just now coming back online following months of coronavirus-related closure. There's a lot of concern over a possible “second wave” of the disease hitting later on this year, and no one wants to be holding the bag going into another possible massive coronavirus-related sell-off. Then there's the election, the results of which are likely to fundamentally alter the face of everything going on in the United States, and by extension, the world.

Ignore all of that, says UBS. Why? Two words: “Federal Reserve.” The Fed is putting up what UBS calls an “unambiguous” story, one that's going to send stocks climbing for the “medium-term”. Those who aren't getting in on the action now when stocks are still comparatively fresh off their lows are going to miss out on one major climb.

Putting Its Collective Money Where Its Equally Collective Mouth Is

UBS isn't just recommending that some small-investor-type dopes go first and take the first hit. No, UBS is getting its own plans around to follow its advice. Late last week, the company started showing off plans to start buying again itself, and in grand style. It's set to buy a string of corporate bonds, diversified across a range of companies and industries. UBS' plan to go forward on investing is the result of considerations across three “stories,” as it calls them, essentially narratives driving investor perception forward.

The first such story is the “second-wave story,” or the resurgence of coronavirus already seen in some parts of the world that previously had the disease seemingly under control, like in South Korea or even China.

The second is the “U.S election story,” which will come to an end one way or another hopefully in November. That one is obvious enough, though the knock-on effects from either side's win range from economic turmoil to out-and-out violence, depending on who you talk to. With issues of US-China tension also coming into play, that puts extra weight on the November elections, as the outcome of those will determine the overall stance to China going forward.

The third story, the aforementioned “unambiguous” story, is the “Fed story.” The Fed story is the description of the central bank of the United States' role in economics, and as of now, it's anything but hands-off. It's given rise to a whole new meme known as “Money printer go brrrr”, which basically explains how the central bank is dumping cash into just about anything in sight, risk of hyperinflation be quite thoroughly ignored. That third story, a flood of liquidity from the central bank to rival Niagara Falls compressed into one fire hose, is what's going to shape the immediate future of investing.

A Story With a Grim Ending

UBS isn't not alone on this front, either; the Bank of England, as well as the European Central Bank, are all poised to lend their support to equities, raising disturbing questions worldwide about the role of a central bank and the specter of the Weimar Republic all over the world.

There's no doubt that liquidity is going to pack the market for some time to come, and indeed, that's likely to send stock prices careening upward. There are concerns that this will prove a false economy, as the spike in equity prices isn't so much a matter of improved value in equities, but rather a marked reduction in the value of the US dollar because there are so very many of them out there. We've seen as much happen in the commodities market for months; when oil markets went negative, was it because the world had suddenly eschewed the internal combustion engine? No. It's because there were tanker-loads of it parked outside just about every major port in the world.

UBS is right that the Fed story is the story that will ultimately dominate the markets. But this story may not have a happy ending.