Headlines
UBS downgrades weighting on US equities to neutral
Published by Global Banking & Finance Review®
Posted on February 27, 2026
2 min readLast updated: February 27, 2026
Quick Summary
UBS cut its recommended allocation to U.S. equities to neutral, arguing that rich valuations and lower “operational leverage” make U.S. earnings less geared to an upswing in global growth. The bank also flagged accelerating investor diversification via ETFs and a weaker-dollar backdrop as additional
UBS Downgrades US Equities to Neutral Amid Rising Global Growth Bets
Main Analysis from UBS Strategy Note
UBS Revises U.S. Equities Allocation
SINGAPORE, Feb 27 (Reuters) - UBS said on Friday it has cut its recommended allocation to U.S. equities to neutral, as the world's biggest stock market risks lagging behind while growth accelerates elsewhere.
Key Reasons Behind the Downgrade
In a note, strategists Andrew Garthwaite and Marc el Koussa cited reasons such as the relatively lower sensitivity of U.S. corporate earnings to global growth, high valuations, the trend of funds diversifying outside of the United States and downside risks to the dollar, among other things.
Operational Leverage and Performance Implications
"The U.S. has the lowest operational leverage of any major region and thus historically underperforms if global growth accelerates to be above 3.5%," they said.
UBS forecasts global GDP to come in at 3.4% in 2026.
Global Investment Trends
Global investors have been pulling money from the world's largest stock market, as waning Big Tech returns and chaos over domestic policymaking leaves them searching for alternatives.
The Role of the U.S. Dollar Weakness
Weakness in the dollar - which last year clocked its worst annual performance since 2017 - has been another push factor.
Shift Towards Global Diversification
"From our marketing in North America, it seems unambiguous that funds will go global," said the strategists.
"ETF flows show diversification is happening."
Context: U.S. Market Size in Perspective
Still the U.S. market is so large that even a benchmark allocation would remain a hefty one, with U.S. stocks comprising more than 70% of the MSCI World Index of global stocks.
(Reporting by Rae Wee; Editing by Jacqueline Wong and Stephen Coates)
Key Takeaways
- •UBS’s call leans on a “global growth broadening” thesis: it forecasts 2026 global GDP at 3.4% and says the U.S. historically lags when global growth is strong because it has comparatively low operational leverage (earnings sensitivity) versus other regions.
- •Flow data supports the diversification narrative: U.S.-listed ETFs saw international equity ETFs lead January 2026 inflows ($52.1B) versus $21.1B into U.S. equity ETFs, following a surge in international ETF demand during 2025. (am.jpmorgan.com)
- •Even with reallocations, benchmark reality matters: MSCI World remains heavily U.S.-weighted (commonly cited as 70%+), so “neutral” still implies very large U.S. exposure for global investors. (ad-hoc-news.de)
References
Frequently Asked Questions about UBS downgrades weighting on US equities to neutral
1Why did UBS downgrade US equities to neutral?
UBS cited lower sensitivity of US earnings to global growth, high valuations, increased diversification outside the US, and downside risk to the dollar as reasons for downgrading US equities to neutral.
2How are investors reacting to the US stock market outlook?
Investors are diversifying outside the US, pulling money from US equities due to waning Big Tech returns and uncertainty in domestic policymaking.
3What effect has the dollar's weakness had on global investment?
Dollar weakness has contributed to investors seeking opportunities beyond the US as it recorded its worst annual performance since 2017.
4Do US stocks still have a major role in global indices?
Yes, even at a neutral allocation, US stocks make up over 70% of the MSCI World Index.
