How should investors reallocate their portfolios this summer to maximize carry? By Investing.com

UBS analysts expect the summer to be a good time to make strategic adjustments to the financial portfolio to maximize returns, with a focus on short-term European investment grade (IG) debt and strategic diversification.

In a note dated Tuesday, analysts at UBS said they see a return to stability in credit spreads across Europe, particularly in the high-yield space, following recent volatility caused by the French election.

Recommendations to enhance pregnancy in the summer

Prioritising short-term European investment governance: Analysts at UBS stress the attractiveness of short-term debt (3-5 years) in the European FDI landscape. This sector offers particularly attractive returns in light of the recent inversion of the yield curve.

Re-embracing US government bonds: For the first time in nearly two years, UBS recommends incorporating US IG bonds (7-10 years) into your investment strategy. This strategic shift reflects an evolving outlook on the market.

Diversification with GBP IG: IG GBP Bonds (5-7 years) are recommended for purchase due to their low correlation to interest yields and their potential to generate attractive returns.

Strategic risk mitigation: UBS advises reducing exposure to riskier assets such as high-yield European bonds (3-5 years) and credit default swaps (CDS) such as ITRX Main.

Emerging Markets: While cash remains preferable to emerging markets exposure in the near term, investors who are cash and industrials-only can cautiously return to emerging markets at a benchmark weight. Industrials-only investors have the flexibility to increase their emerging markets allocations as well.

Maintain long HY mode: The report recommends maintaining a long HY vs IG position in both the US and European markets.

UBS Model Recommendation

Cash + Synthetic Investors: Increase allocation to US Treasuries (3-5 years), reduce exposure to junk European Treasuries (3-5 years) and key Italian Treasuries, cautiously re-enter emerging markets at benchmark weight, and maximize allocation to UK Treasuries (5-7 years).

Synthetic investors onlyIncrease allocation to US equity markets (3-5 years) and emerging markets, maintain a long-term position against blue chips in both regions, and limit exposure to major Indian equity markets