This report has been prepared by UBS AG. Please see important disclaimers and ­disclosures­at­the­end­of­the document.­

UBS House ViewMonthly Letter 16 July 2020

Chief­Investment­Office­GWMInvestment Research

No lockdowns

We­have­now­learned­enough­to say that policymakers are unlikely to use national lockdowns­again­to­control­the spread of COVID-19.

Pent-up demand

Forced­savings­during­lockdown­have­left­consumers­with money to spend, potentially­further­supporting­the economic recovery.

Stimulus­coming

Both Republicans and Democrats have an incentive to­agree­on­further­fiscal­stimulus before the US presidential election.

Investment ideas

Long­term,­there­is­no­alternative­to­equities.­We­show­how­to­filter­out­the noise­and­recommend­strategies­for­investing­across­three­different­scenarios.

Keynesian­epidemiologyDallas­ Federal­ Reserve­ Bank­ President­ Robert­ Kaplan­ probably­ never­ thought­he would­achieve­international­fame­for­his­views­on­the­economics­of­covering­your­mouth.­ Yet­ when­ Kaplan­ said­ that­ wearing­ face­masks­ was­ “the­most­important­thing­we­can­do­right­now”­to­hasten­the­economic­recovery,­it­rever-berated around the world. Like investors, the Federal Reserve has one eye on stimulus measures to support the economy, and another on virus transmission rates.­ To­ paraphrase­Milton­ Friedman,­ “We­ are­ all­ Keynesian­ epidemiologists­now.”

Since­last­month’s­letter,­the­Nasdaq­is­up­6.1%­and­hit­a­new­high,­the­S&P 500­has­gained­3.6%,­China’s­CSI 300­has­gone­up­11.7%,­and­global­stocks­have­risen­ 4.2%.­Market­ confidence­ has­ increased­ despite­ the­ spike­ in­ virus­ case­counts­ in­ the­American­ South,­ and­ some­governments­ choosing­ to­ return­ to­stricter­social­distancing­measures.­

In­this­ letter,­ I­discuss­why­we­believe­global­equities­can­continue­to­be­sup-ported­in­the­second­half­of­the­year.­We­think­countries­won’t­lock­down­again­because­of­a­“second­wave.”­Furthermore,­a­combination­of­pent-up­demand,­government­ stimulus,­ and­ negative­ real­ interest­ rates­ should­ provide­ further­upside­for­stocks­in­the­months­ahead.­I­also­provide­our­latest­thinking­on­posi-tioning­ahead­of­the­US­election,­how­to­filter­out­some­of­the­short-term­noise,­and our key investment ideas across our upside, central, and downside scenarios for markets.

Why­we­think­investing­makes­sense­today­

1) Countries won’t lock down again

Our view remains that the recent increase in COVID-19 infections in various places around the world will not lead to the reimposition of national lockdowns. COVID-19­remains­a­human­tragedy,­and­politics­can­drive­decisions­in­counter-intuitive­ways.­However,­a­number­of­things­we­have­ learned­about­the­virus­since­March­seem­to­be­pointing­policymakers­toward­less­economically­destruc-tive measures to slow the spread of the virus:

Recent increases in COVID-19 infections won’t lead to renewed national lockdowns.

Mark HaefeleChief­Investment­OfficerGlobal­Wealth­Management

Follow me on LinkedInlinkedin.com/in/markhaefele

Follow me on Twittertwitter.com/UBS_CIO

Keynesian epidemiology

2July 2020 – UBS House View Monthly Letter

– The virus is not as deadly as it appeared at the start of the outbreak. Part­of­the­reason­governments­chose­to­take­such­stringent­action­against­the­novel­coronavirus­was­its­perceived­high­hospitalization­and­mortality­rate.­Early­estimates­from­the­World­Health­Organization­put­the­mortality­rate­at­3.4%,­ but­ this­ proved­ to­ be­ an­ overestimate­ partly­ because­ asymptomatic­individuals­were­not­diagnosed­due­to­limited­testing­capacity.­A­recent­Lancet study­estimated­the­mortality­rate­at­0.5–1%­in­European­populations,­while­a­study­ in­Geneva­put­ the­number­at­0.6%.­This­ is­before­we­consider­ the­impact­of­approved­treatments­like­remdesivir­and­the­large­variation­of­fatal-ity­ rates­ across­ different­ age­ groups,­which­ could­ influence­more­ targeted­suppression­strategies­in­the­future.­

– The virus is not as infectious as it first appeared.­Another­reason­govern-ments­rushed­to­lock­down­was­the­assumption­that­the­virus’s­high­infection­rate meant it could rapidly overwhelm national healthcare systems. Initial esti-mates­of­“Rt”—the­average­number­of­people­to­whom­one­infected­individ-ual­ spreads­ the­ virus—were­ around­2.4.­ But­ as­ testing­became­more­wide-spread,­the­estimates­began­to­fall.­For­example,­in­March,­the­infection­rate­in­Arizona­was­estimated­at­2.61.­This­fell­to­1.07­by­the­time­lockdowns­began,­and­fell­further­during­the­lockdown.­While­the­Rt­increased­after­reopening,­it­quickly­ dropped­ back­ and­ has­ remained­ broadly­ stable­ around­ 1.02­ even­throughout­the­widely­reported­second­wave­in­the­state­(see­chart).­This­level-ling­off­around­1­ is­consistent­with­the­experience­ in­other­states­ like­Texas,­Florida, and California, and across much of the developed world.

– A significant portion of some populations have already contracted the virus. Antibody­surveys­suggest­that­around­5%­of­individuals­in­France­and­Spain,­14%­in­New­York­State,­17%­in­London,­and­21%­in­New­York­City­may­have­been­infected­already.­T-cell-based­immunity­may­be­higher­still.

These­new­learnings­are­ important­because­they­mean­that­a­“mask-wearing-herd­immunity”­strategy­is­now­more­plausible.­When­Rt­is­at­2.5,­the­theoretical­threshold­to­reach­herd­immunity­is­60%­of­the­population,­as­has­been­widely­reported.­Yet­Rt­rates­of­1.02,­1.1,­and­1.2­are­consistent­with­herd­immunity­thresholds­of­2%,­9%,­and­17%,­respectively,­which­are­lower­than­the­antibody­levels observed in London and New York City. Lower mortality, lower infectious-ness,­and­the­presence­of­recovered­cases­in­the­population­mean­smaller­efforts­

The virus is neither as deadly nor as­infectious­as­it­appeared­at the start of the pandemic.

Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0

Shelter started Shelter ended

TX FL AZ

Rates of infection (Rt) have fallen and stabilized near 1Figure 1

Rt, the average number of people who become infected by an infectious person, for selected US states

Source: Rt.live, UBS, as of 15 July 2020

Florida (FL) Texas (TX) Arizona (AZ)

Keynesian epidemiology

3July 2020 – UBS House View Monthly Letter

at­mask­wearing,­contact­tracing,­and­bar­closings­can­be­effective­at­slowing­the public­spread­of­the­virus­compared­to­what­was­initially­predicted.­Of­course,­the closer we are to herd immunity, the fewer doses of vaccine we need to start to­show­a­public­health­benefit.­COVID-19­remains­a­terrible­disease­for­many­victims,­and­local­medical­systems­still­face­strains.­Yet­if­we­look­at­hospitaliza-tion­rates,­there­are­already­signs­that­the­virus­outbreaks­in­places­like­Arizona­and­Texas­are­slowing­again.­­­

1-May 1-Jun 1-Jul

80

60

40

20

0

–20

–40

The increase in those hospitalized with COVID-19 is slowing in Arizona and Texas

Figure 2

Currently hospitalized COVID-19 patients week-over-week % change

Source: The COVID Tracking Project, UBS, as of 15 July 2020

AZ TX

When­will­a­COVID-19­vaccine­be­ready?

–­ Sixteen­ vaccine­ candidates­were­ in­ human­ clinical­ trials­ globally­ as­ of­14 July.

–­ Both­Pfizer­and­Moderna­released­preliminary­Phase­1­vaccine­trial­results­this month. The data for these two RNA-based vaccines indicate that both are safe, and both appear to lead to immune responses at least as strong­as­those­seen­in­recovered­COVID-19­patients.

–­ Substantially­larger­studies­will­be­needed­to­determine­if­these­antibod-ies­lead­to­protection­from­the­disease.­Both­vaccines,­along­with­a­third­from­AstraZeneca,­are­due­to­enter­ large-scale­Phase­3­trials­ in­the­US­shortly­(30,000­patients­each),­and­could­produce­efficacy­data­in­the­fall.

– Based on our latest assessment of the available data and current knowl-edge­ of­ SARS-Cov-2­ immunology,­ we­ expect­ several­ of­ the­ vaccine­­candidates­now­in­clinical­trials­to­succeed.­But­the­strength­and­dura-tion of immunity are not yet known, and revaccination may be necessary.

– Our central scenario assumes one or more vaccines are widely available in­the­US­during­2Q21,­with­the­potential­for­limited­doses­to­be­availa-ble­in­late­2020­for­at-risk­workers­under­an­emergency­authorization.

–­ Based­on­disclosed­capacity­announcements,­up­to­600mn­doses­could­be­available­for­Western­economies­by­late­2020­or­early­2021,­rising­to­around­4bn­doses­by­end-2021.­Actual­capacity­will­depend­on­the­opti-mal­dosage­for­each­vaccine,­and­assumes­that­each­one­is­successful.

Keynesian epidemiology

4July 2020 – UBS House View Monthly Letter

2) Pent-up demand should support a recovery

The­bounce-back­in­economic­activity­to­date­has­generally­surpassed­consensus­forecasts,­ with­ economies­ responding­ more­ positively­ than­ expected­ to­ the­­lifting­of­lockdown­restrictions.

Consumption­ is­being­driven­ in­part­by­pent-up­demand.­The­US­savings­rate­peaked­at­32%­in­April,­its­highest­level­ever,­and­remains­at­23%,­more­than­triple pre-COVID levels. In the UK, the rate has doubled from precrisis levels, and in­France­it­is­40%­higher.­Although­consumers­may­have­increased­savings­in­response­to­higher­uncertainty,­they­are­spending­at­least­some­of­those­savings.­In the US retail sales jumped by a record 18% from April to May and by a further 7.5%­in­June,­while­in­the­Eurozone,­sales­also­rose­18%­month-on-month­in­May,­ bringing­ spending­ close­ to­ 2019­ levels.­ In­Germany,­ retail­ sales­ in­May­rebounded­above­2019­levels,­recording­a­3.8%­year-over-year­rise.­

Following­this­consumer­response,­we­expect­production­to­follow.­The­US­Man-ufacturing­ ISM­ is­ back­ above­ 50.­ The­ nonmanufacturing­ ISM­ index­ for­ June­rebounded­to­57.1,­bringing­the­ index­back­to­February’s­prepandemic­ levels.­In  China,­ both­ the­manufacturing­ and­ nonmanufacturing­ PMIs­ have­ been­ in­expansionary­territory­above­50­for­four­months.­Data­in­Europe­has­been­more­disappointing­(PMIs­remain­below­50,­and­in­Germany­industrial­production­rose­by­a­lower-than-expected­7.8%­in­May),­but­we­expect­data­on­production­and­consumption to continue to improve.

Another­important­indicator­of­recovery­is­the­improvement­in­Asian­exports.­For­Asia­ex-Japan,­the­change­in­three-month­exports­relative­to­the­three­months­prior­ is­ running­ at­ roughly­ 4%,­mostly­ due­ to­ China.­ In­ June,­ both­ sides­ of­­Chinese­ trade­ exceeded­ 2019­ levels,­ with­ year-over-year­ growth­ of­ 2.7%­ in­imports­and­0.5%­in­exports.­This­is­more­of­a­“V”­shaped­recovery­than­was­experienced­ after­ the­ global­ financial­ crisis.­We­ expect­ consumer­ demand­ to­continue­ to­ improve­ and­ a­ lift­ in­ Asian­ export­ and­ income­ growth­ in­ 3Q­ to­ further boost local sentiment.

After­the­lockdown,­some­consumers­have money­to­spend. Pent-up demand should support­a­recovery.

The economic recovery has surprised to the upside and remains on track.

1960 1970 1980 1990 2000 2010 2020

35

30

25

20

15

10

5

0

The US personal savings rate has never been so highFigure 3

US personal saving as a % of personal income

Source: Bloomberg, UBS, as of 24 June 2020

Keynesian epidemiology

5July 2020 – UBS House View Monthly Letter

3) Preelection politics potentially primes the pump

Further­support­to­the­economy­could­be­coming­from­preelection­politics­in­the­United States.

As­it­stands,­the­additional­USD­600­per­week­in­unemployment­benefits­pro-vided­ in­March­by­ the­CARES­Act­expires­at­ the­end­of­ July,­and­the­USD 3tr­HEROES­Act,­which­ includes­ the­distribution­of­USD 1,200­stimulus­checks,­ is­stuck­in­the­Senate.­This­“fiscal­cliff”­is­a­risk­to­the­recovery­and­is­likely­prevent-ing­US­consumers­from­spending­more­of­their­savings.­However,­both­the­Dem-ocrats­and­Republicans­have­a­ strong­ incentive­ to­push­ through­ further­fiscal­stimulus­this­summer­in­order­to­garner­support­ahead­of­November’s­presiden-tial election.

On­9­July,­US­Treasury­Secretary­Steven­Mnuchin­said­the­Trump­administration­is­working­with­the­Senate­to­pass­a­new­stimulus­bill­by­the­end­of­the­month.­President­Donald­Trump­said­at­the­start­of­July,­“I­support­actually­larger­[stimu-lus]­ than­ the­ Democrats.”­ Negotiations­ will­ start­ in­ earnest­ when­ Congress­comes­back­into­session­on­20­July.­We­expect­a­package­of­at­least­USD 1tr­to­pass by the end of the month.

Looking­ beyond­ the­ election,­ the­ trend­ toward­ fiscal­ stimulus­ looks­ set­ to­­continue.­This­month,­the­House­of­Representatives­passed­the­Moving­Forward­Act,­a­USD­1.5tr­plan­to­rebuild­US­infrastructure,­although­the­bill­remains­in­the­Senate.­We­don’t­expect­a­large­deal­to­be­passed­preelection,­but­the­need­to­spend­on­infrastructure­is­one­of­the­few­issues­that­both­US­parties­agree­on.­Meanwhile,­Joe­Biden­recently­announced­his­own­spending­proposals,­unveiling­a­plan­to­“Buy­American”­with­government­purchases­of­USD­400bn­of­­US-made­goods,­ and­USD­ 300bn­ of­ R&D­ spending­ on­US­ technology­ such­ as­ 5G­ and­ electric vehicles.

Stimulus­is­also­not­just­limited­to­the­US:­European­Union­leaders­are­meeting­to­discuss­a­proposed­EUR 750bn­recovery­fund,­although­an­agreement­may­not­be­finalized­this­month.­In­addition,­on­14 July­French­President­Emmanuel­Macron­promised­to­spend­another­EUR 100bn­to­boost­the economy,­on­top­of­the­EUR­460bn­already­ in­place.­And,­at­the­start­of­July,­the­UK­government­announced­a­program­of­further­measures­worth­up­to­GBP 30bn.

Both Republicans and Democrats have­a­strong­incentive­to­agree­on further preelection stimulus.

US UK Germany France China

16

14

12

10

8

6

4

2

0

Governments around the world are providing substantial fiscal stimulus

Figure 4

Fiscal stimulus,% of GDP; does not include loan guarantees

Source: IMF, UBS, as of July 2020

Keynesian epidemiology

6July 2020 – UBS House View Monthly Letter

4) Equities are a TINA market

To­earn­positive­real­returns­over­the­long­term,­there­is­no­alternative­to­­owning­equities.

As­I­discussed­last­month,­the­Federal­Reserve­has­been­more­explicit­than­ever­before­about­its­commitment­to­support­the­economy­through­the­crisis­and­its­ability­to­live­with­rising­asset­prices.­Using­market-based­forward­rates,­markets,­encouraged­by­the­Fed,­don’t­expect­higher­rates­for­years­to­come.­

For­investors,­this­creates­at­least­two­problems.­First,­portfolio­income­is­getting­harder­to­find­almost­everyday.­Second,­cash­and­high­grade­bonds­are­expected­to­deliver­negative­real­returns­for­the­foreseeable­future.­

Given­the­dire­outlook­for­returns­in­cash­and­bonds,­for­investors­with­a­long-term­focus,­our­core­recommendation­is­to­take­steps­to­filter­out­the­short-term­noise­and­start­getting­invested­in­stocks­for­the­long­term­(see­box­on­the­next­page).­Despite­ the­ rally,­based­on­equity­ risk­premiums,­global­ stocks­are­ still­cheap­relative­to­bonds,­trading­in­the­10th­percentile­of­relative­valuation­since­1997.­Historical­experience­suggests­that­excess­liquidity­provision­will support­further­expansion­in­equity­multiples­(Fig.­5).

Over­the­long­term,­there­is no mainstream­alternative­to owning­equities.

Investment­strategies­for­the­US­election

Both­President­Trump­and­Joe­Biden­have­emphasized­the­need­for­more­spending,­but­there­are­few­similarities­in­their­policy­platforms.­This­diver-gence­has­ important­consequences­for­US­sectors.­ In­our­ latest­Election-Watch­ report,­ “Investment­ implications­ of­ the­ 2020­ US­ elections,”­ we­detailed the implications for markets:

A Blue Wave: the Democratic Party both takes the presidency and wins a majority in Congress.­We­would­expect­outperformance­by­stocks­exposed­to­ energy­ efficiency,­ smart­ mobility,­ and­ renewables­ as­ President­ Biden­adopts­a­green­agenda.­We­also­highlight­companies­that­are­more­insu-lated­from­an­increase­ in­corporate­taxes­and­those­that­could­benefit­ if­trade­tensions­cool.­Within­healthcare,­we­focus­on­companies­that­could­benefit­from­an­expansion­of­health­coverage.

A Red Wave: the Republican Party both takes the presidency and wins a majority in Congress. Select­energy­and­financial­companies­could­benefit­from­a­“relief­rally”­if­tighter­regulations­from­a­possible­Biden­administra-tion are avoided. The Trump administration has been supportive of further developments­ in­ space­ technologies,­ and­ defense­ companies­ could­ also­enjoy­support­ in­a­second­Trump­term.­Within­healthcare,­our­selections­are­focused­on­managed­care­companies.

Campaign warriors: opportunities shielded from election outcomes. Many investors may prefer to keep politics out of their portfolios. Therefore, we have­also­highlighted­a­number­of­stocks­that­are­relatively­insulated­from­campaign­ issues.­ These­ include­ companies­ in­ communication­ services,­companies­with­a­diverse­revenue­stream­or­diversified­content,­consumer­staples,­and­portions­of­the­IT­sector­that­have­remained­out­of­the­regula-tory­spotlight.

For more on the implications of the US election on markets, read our ElectionWatch­report­published­6­July.­

Keynesian epidemiology

7July 2020 – UBS House View Monthly Letter

20

15

10

5

0

–5

120

100

80

60

40

20

0

–20

–40

–601983 1988 1992 1996 2001 2005 2010 2014 2018

Excess liquidity supports expansion in equity multiplesFigure 5

OECD excess liquidity, 3-month lead (lhs); global equities, 12-month % change in P/E (rhs)

OECD excess liquidity (3m lead) Global equities, 12m % change in P/E (3mma, rhs)

Note: Excess liquidity defined as OECD growth in M1 minus nominal GDP growth.

Source: Datastream, UBS, as of June 2020. Excess liquidity estimates are included and may change when data is released.

How­to­filter­out­the­noise­­

One­of­the­most­important­lessons­of­the­first­half­of­the­year­was­ the­ cost­of­bad­market­ timing.­By­23­March,­equities­had­fallen­34%­from­their­highs,­equivalent­to­an­average­post-WWII­bear­market­ in­ just­one­month.­But­the­S&P­500­has­since­rallied­by­44%­from­its­lows.­With-out­a­robust­ investment­strategy,­the­risk­of­permanent­wealth­destruction­is­high.­

Have a plan.­Our­latest­UBS­Investor­Watch­survey­high-lights­ the­ dilemma­ many­ investors­ face.­ While­ 81%­worry about another market decline before the pan-demic­ is­ over,­ 79%­believe­ there­ is­ opportunity­ in­ the­current environment.

Our­Liquidity.­Longevity.­Legacy.*­approach­remains­key­to­providing­investors­with­the­structure­they­need­to­pre-vent­ emotions­ and­ indecision­ from­ clouding­ long-term­opportunity.­ It­ suggests­ investors­ should­ only­ set­ aside­two­to­five­years’­worth­of­net­expenses­(net­of­earned­income)­ in­ cash­ and­ high-quality­ bonds.­ With­ this­ in­place,­investors­should­have­a­sufficient­“buffer”­in­place­to­provide­for­short-term­cash­flow­needs.­The­remainder­of­the­portfolio­can­then­be­invested­for­growth­opportu-nities­over­the­medium­and­long­term.­

Deal with volatility in a disciplined way. One of the key­costs­of­volatility­for­long-term­investors­is­indecision,­with­ investors­ often­ stuck­ in­ “safe”­ but­ low-yielding­assets­for­extended­periods­as­they­wait­for­certainty­to­rise­sufficiently­(which­invariably­it­never­does).­One­way­

of­overcoming­this­is­to­commit­to­a­phasing-in­strategy­based­on­time­or­price,­for­example­by­using­either­dol-lar-cost­averaging­or­structured­investment­solutions­like­those­involving­put­options.­

Investors­can­also­benefit­from­volatility­by­committing­to­rebalancing­ existing­ portfolio­ holdings­ in­ a­ structured­way.­One­way­is­to­implement­a­rebalancing­strategy,­in­which portfolios are automatically rebalanced once the equity­ concentration­ in­ the­ portfolio­ drifts­ beyond­ a­­certain­ percentage.­ In­ a­ good­ example­ of­ its­ potential­benefits,­ rebalancing­ at­ the­ end­ of­ the­ first­ quarter­ in­2020,­when­stocks­sold­off­and­bonds­rallied,­would­have­enabled­investors­to­increase­their­profits­from­the­stock­market rebound.

Delegate your decision-makingOver­ the­ long­ term,­ investors­ can­ also­ benefit­ from­ a­structured­ approach­ to­ decision-making­ and­ risk­ man-agement,­whether­that’s­achieved­by­writing­down­and­sticking­to­a­personal­investment­strategy,­or­by­delegat-ing­decision-making­ to­ something­other­ than­an­ inves-tor’s­own­brain—be­it­a­professional­manager­or­a­quan-titative­signal.­

*­ Timeframes­may­ vary.­ Strategies­ are­ subject­ to­ individual­ client­goals,­objectives,­and­suitability.­This­approach­is­not­a­promise­or­guarantee­ that­ wealth,­ or­ any­ financial­ results,­ can­ or­ will­ be­achieved.

Keynesian epidemiology

8July 2020 – UBS House View Monthly Letter

Investment ideas

We­maintain­an­overall­risk-on­asset­allocation­expressed­through­a­preference­for­global­equities­and­various­credit­segments.­Unprecedented­money­creation­and stimulus should continue to underpin asset prices. Further improvement in the macroeconomic numbers, or positive virus developments, would allow us to capture moves to the upside.

Key COVID-19 scenarios and asset class impact

Upside Central Downside

Investment ideas Top three ideas 1. Position for the upside in equities­(select­cyclicals­and­value)

2. Buy into themes acceler-ated­by­COVID-19­(e.g.,­digital­transformation)

3.­ Prepare­for­US­dollar­ weakness

1. Buy resilient stocks (quality­and­dividends)

2.­Buy­into­a­green­recovery­(green­bonds,­MDB­bonds,­SDG­themes)

3.­Hunt­for­yield­ (credit­opportunities)

1. Gold2. CHF3.­ Take­advantage­of­volatility­

(phased­entry,­put­writing)

Scenario Description A return to normal social activity­by­4Q20­(i.e.,­V-shaped­recovery)­partly­due­to­an­effective­vaccine­or­cure­being­available­at­full­scale­by­end-2020,­sophisticated­test­and trace models, or herd immunity­being­reached­in­some countries. Minor local outbreaks remain possible.

Status quo in US-China rela-tions. Both countries stick to Phase 1 trade deal.

Central banks remain accom-modative but indicate rate hikes­in­2H20–21.

Sustained economic recovery starting­in­3Q20­and­a­return­to­“normal”­social­activity­by 1H21­(i.e.,­U-shaped­recovery).­Softer­restrictions­remain in place. Future local recurrences of the virus can be­digested­by­health­systems.

The US and China stick to their­Phase­1­deal­(i.e.,­no­tariff­increase)­but­relations­deteriorate, with new capital-flow­and­investment­restrictions­and­toughening­political rhetoric.

Central banks remain accommodative, with no rate increase­by­end-2021.

A major second wave of the virus hits and health systems are unable to cope with it. Lockdowns are reimposed intermittently. No vaccine or drug­treatment­is­made­available­until­mid-2021.­The­global­economy­does­not­recover before 2H21.

Geopolitical­meddling­with­China,­blocking­Chinese­tech­companies,­or­reimposing­tariffs­could­threaten­the­Phase­1 deal between the US and China.

Central banks inject more liquidity to limit economic damage.

Asset class impact(targets­for­ June­2021)

Spot

S&P 500 3,198 3,500 3,300 2,800

Euro Stoxx 50 3,321 3,800 3,300 2,600

MSCI EM 1,071 1,250 1,150 800

SMI 10,260 11,300 10,800 9,000

USD IG spread* 111 100bps­(1.5%­t.r.) 120bps­(1%­t.r.) 300–400­bps­(–5%­%­t.r.)

USD HY spread* 603 400bps­(12%­t.r.) 550bps­(5%­t.r.) 1,000–1,500bps­(–12%­t.r.)

EMBIG spread* 464 280bps­(15%­t.r.) 400bps­(9%­t.r.) 700–800bps­(–10%­t.r.)

EUR USD 1.14 1.25 1.19 1.05

Gold 1,806 USD­1,400–1,500/oz USD­1,800/oz USD­1,900–2,000/oz

*­During­periods­of­market­stress,­credit­bid-offer­spreads­tend­to­widen­and­result­in­larger­ranges.­Percentage­changes­refer­to­expected­total­return­(t.r.)­for­the­indicated­spread­levels.­Spot­numbers­as­of­14­July.

Source:­UBS,­as­of­July­2020

Keynesian epidemiology

9July 2020 – UBS House View Monthly Letter

Upside scenario

Position for the upside in equities.­We­expect­the­recovery­to­gain­traction­over­ the­coming­year­and­so­ focus­on­select­parts­of­ the­market­ that­ remain­below­prior­highs.­These­include­US­mid-caps,­“laggards­with­growth”­in­Europe,­and­opportunities­exposed­to­reopening­economies­in­the­US,­Europe,­and­Asia.­We­also­like­UK­equities,­particularly­in­light­of­our­positive­view­on­oil.

Buy into themes accelerated by COVID-19. The pandemic has sped up secu-lar­trends­like­digitalization,­driving­a­faster­adoption­of­disruptive­technologies­from­retail­to­healthcare.­Our­recent­reports­“Future­of­the­Tech­Economy”­and­“Doing­ Business­ in­ Europe”­ identify­ opportunities­ across­ the­ technology­ uni-verse,­including­medtech,­smart­mobility,­telecom,­and­automation,­that­stand­to­­benefit­from­these­themes.­

Prepare for US dollar weakness.­ Over­ the­ balance­ of­ the­ year,­we­ expect­demand­ for­ safe-haven­ assets,­which­ benefited­ the­ dollar­ earlier­ in­ the­ pan-demic,­to­recede.­We­also­expect­prolonged­Fed­easing­and­political­uncertainty­ahead­of­the­US­election­to­undermine­the­greenback.­Our­preferred­currency­against­the­dollar­is­the­British­pound,­which­we­see­as­undervalued.­

Central scenario

Buy resilient stocks.­Investors­looking­to­add­exposure­to­stocks,­but­concerned­about­potential­volatility,­could­employ­a­more­selective­approach­incorporating­quality­and­sustainable­dividends.­We­think­quality­stocks­will­offer­another­year­of­excess­returns­and­lower­risks­than­the­broader­market.­

Buy into a green recovery.­Governments­around­the­world­have­been­boosting­investment­in­green­projects­as­part­of­an­effort­to­revive­growth­following­the­COVID-19­pandemic.­We­expect­this­to­add­further­momentum­to­sustainable­investing,­which­held­up­well­during­the­March­drawdown,­and­performed­well­in­the­rebound.­Our­preferences­include­green­bonds,­multilateral­development­bank­ (MDB)­ bonds,­ and­ investing­ in­ themes­ related­ to­ the­ UN’s­ Sustainable­Development Goals.

Hunt for yield.­Against­a­backdrop­of­lower-for-longer­rates,­investors­are­being­pushed­harder­to­find­yield.­However,­while­credit­spreads­have­tightened,­we­still­see­value­in­credit­as­a­means­of­income­generation.­We­like­US­investment­grade­ and­ high­ yield­ bonds,­ USD-denominated­ emerging­ market­ sovereign­bonds,­European­crossover­bonds,­green­bonds,­and­Asia­high­yield­bonds.

Downside scenario

Gold. Gold­has­been­the­best-performing­asset­this­year­in­US­dollar­terms.­A­number­of­uncertainties­make­us­increasingly­convinced­that­the­gold­price­can­keep­rising.­We­expect­the­yellow­metal­to­trade­at­USD­1,900/oz­in­2H20.­Risks­such­as­new­waves­of­COVID-19,­further­policy­tweaks­by­the­Fed,­and­rising­tensions­between­the­US­and­China­(with­the­latter­likely­to­be­amplified­in­the­run-up­to­the­November­US­presidential­election)­underpin­our­view.­Hence,­we­continue­to­see­gold­as­a­valuable­insurance­asset.

Position for the upside in equities.­

Buy into themes accelerated by COVID-19.

Prepare for dollar weakness.

Buy resilient stocks.

Buy­into­a­green­recovery.

Hunt for yield.

Gold has fundamental support.

Keynesian epidemiology

10July 2020 – UBS House View Monthly Letter

Swiss franc. The­CHF­ combines­ safe-haven­ qualities­with­ a­ growth-oriented­­currency­that­profits­from­a­stronger­European­economy­and­rising­global­trade­volumes.­The­Swiss­National­Bank­has­been­intervening­on­a­large­scale,­but­we­expect­it­might­reduce­its­efforts­and­accept­a­somewhat­stronger­currency.

Take advantage of volatility.­Higher­volatility­can­work­to­ investors’­advan-tage­if­they­act­with­discipline.­For­investors­worried­about­the­risk­of­ill-timed­investment,­we­recommend­using­a­dollar-cost­averaging­strategy­to­“smooth­the­bumps”­while­building­up­ long-term­positions.­A­put-writing­strategy,­ for­those who can implement options, can also help investors earn a yield while precommiting­to­taking­advantage­of­“buy­the­dip”­opportunities­if­they­arise.­

Mark HaefeleChief­Investment­OfficerGlobal­Wealth­Management

The Swiss franc has safe-haven appeal,­but­should­also­benefit­from a weaker dollar.

Take­advantage­of­volatility.­

UBS Investor Forum InsightsAt this month’s Investor Forum participants focused on the outlook for economies,­policy,­and­markets­following­the­COVID-19­pandemic.­

•­ Participants­agreed­that­the­pandemic­would­produce­lasting­harm­for­consumption and investment. However, several participants were opti-mistic that a return to nationwide lockdowns would not take place, per-mitting­a­gradual­economic­revival.­

•­ Central­banks­were­seen­as­being­in­wait-and-see­mode.­An­end­to­eas-ing­from­central­banks­and­governments­will­come­–­but­not­soon.­In­the­near­term,­participants­agreed­central­banks­have­the­capacity­to­inno-vate­ if­ economic­conditions­deteriorate­again.­Participants­also­agreed­that­ politicians­ will­ be­ looking­ to­ consolidate­ fiscal­ stimulus­ over­ the­months ahead.

• Risks arise from the US presidential election and US-China tensions. Geo-political­fragmentation­increased­the­importance­of­portfolio­diversifica-tion, one participant observed.

Follow me on LinkedInlinkedin.com/in/markhaefele

Follow me on Twittertwitter.com/UBS_CIO

Follow Mark Haefele on Linkedin and Twitter

11July 2020 – UBS House View Monthly Letter

Liquidity. Longevity. Legacy. disclaimerTimeframes­may­vary.­Strategies­are­subject­to­individual­client­goals,­objectives,­and­suitability.­This­approach­is­not­a­promise­or­guarantee­that­wealth,­or­any­fi­nancial­results,­can­or­will­be­achieved.­

UBS­Chief­Investment­Offi­ce’s­(“CIO”)­investment­views­are­prepared­and­published­by­the­Global­Wealth­Management­business­of­UBS­Switzer-land­AG­(regulated­by­FINMA­in­Switzerland)­or­its­affi­liates­(“UBS”).The­ investment­ views­ have­ been­ prepared­ in­ accordance­ with­ legal­ requirements­ designed­ to­ promote­ the­ independence of investment research.

Generic investment research – Risk information:This publication is for your information only­and­is­not­intended­as­an­off­er,­or­a­solicitation­of­an­off­er,­to­buy­or­sell­any­investment­or­other­specifi­c­product.­The­analysis­contained­herein­does­not­constitute­a­personal­ recommendation­or­take­ into­account­the­particular­ investment­objectives,­investment­strategies,­fi­nancial­situation­and­needs­of­any­specifi­c­recipient.­It­is­based­on­numerous­assumptions.­Diff­erent­assumptions­could­result­in­materially­diff­erent­results.­Certain­services­and­products­are­subject­to­legal­restrictions­and­cannot­be­off­ered­worldwide­on­an­unrestricted­basis­and/or­may­not­be­eligible­for­sale­to­all­investors.­All­information­and­opinions­expressed­in­this­document­were­obtained­from­sources­believed­to­be­reliable­and­in­good­faith,­but­no­representation­or­warranty,­express­or­implied,­is­made­as­to­its­accuracy­or­completeness­(other­than­disclosures­relating­to­UBS).­All­information­and­opinions­as­well­as­any­forecasts,­estimates­and­market­prices­indicated­are­current­as­of­the­date­of­this­report,­and­are­subject­to­change­without­notice.­Opinions­expressed­herein­may­diff­er­or­be­contrary­to­those­expressed­by­other­business­areas­or­divisions­of­UBS­as­a­result­of­using­diff­erent­assumptions­and/or­criteria.

In­no­circumstances­may­this­document­or­any­of­the­information­(including­any­forecast,­value,­index­or­other­calculated­amount­(“Values”))­be­used­for­any­of­the­following­purposes­(i)­valuation­or­accounting­purposes;­(ii)­to­determine­the­amounts­due­or­payable,­the­price­or­the­value­of­any­fi­nancial­instrument­or­fi­nancial­contract;­or­(iii)­to­measure­the­performance­of­any­fi­nancial­instrument­including,­without­limitation,­for­the­purpose­of­tracking­the­return­or­performance­of­any­Value­or­of­defi­ning­the­asset­allocation­of­portfolio­or­of­computing­performance­fees.­By­receiving­this­document­and­the­information­you­will­be­deemed­to­represent­and­warrant­to­UBS­that­you­will­not­use­this­document­or­otherwise­rely­on­any­of­the­information­for­any­of­the­above­purposes.­UBS­and­any­of­its­directors­or­employees­may­be­entitled­at­any­time­to­hold­long­or­short­positions­in­investment­instruments­referred­to­herein,­carry­out­transactions­involving­relevant­investment­instruments­in­the­capacity­of­principal­or­agent,­or­provide­any­other­services­or­have­offi­cers,­who­serve­as­directors,­either­to/for­the­issuer,­the­investment­instrument­itself­or­to/for­any­company­commercially­or­fi­nancially­affi­liated­to­such­issuers.­At­any­time,­investment­decisions­(including­whether­to­buy,­sell­or­hold­securities)­made­by­UBS­and­its­employees­may­diff­er­from­or­be­contrary­to­the­opinions­expressed­in­UBS­research­publications.­Some­investments­may­not­be­readily­realizable­since­the­market­in­the­securities­is­illiquid­and­therefore­valuing­the­investment­and­identifying­the­risk­to­which­you­are­exposed­may­be­diffi­cult­to­quantify.­UBS­relies­on­information­barriers­to­control­the­fl­ow­of­information­contained­in­one­or­more­areas­within­UBS,­into­other­areas,­units,­divisions­or­affi­liates­of­UBS.­Futures­and­options­trading­is­not­suitable­for­every­investor­as­there­is­a­substantial­risk­of­loss,­and­losses­in­excess­of­an­initial­ investment­may­occur.­Past­performance­of­an­investment­is­no­guarantee­for­its­future­performance.­Additional­information­will­be­made­available­upon­request.­Some­investments­may­be­subject­to­sudden­and­large­falls­in­value­and­on­realization­you­may­receive­back­less­than­you­invested­or­may­be­required­to­pay­more.­Changes­in­foreign­exchange­rates­may­have­an­adverse­eff­ect­on­the­price,­value­or­income­of­an­investment.­The­analyst(s)­responsible­for­the­preparation­of­this­report­may­interact­with­trading­desk­personnel,­sales­personnel­and­other­constituencies­for­the­purpose­of­gathering,­synthesizing­and­interpreting­market­information.

Tax­treatment­depends­on­the­individual­circumstances­and­may­be­subject­to­change­in­the­future.­UBS­does­not­provide­legal­or­tax­advice­and­makes­no­representations­as­to­the­tax­treatment­of­assets­or­the­investment­returns­thereon­both­in­general­or­with­reference­to­specifi­c­client’s­circumstances­and­needs.­We­are­of­necessity­unable­to­take­into­account­the­particular­investment­objectives,­fi­nancial­situation­and­needs­of­our­individual­clients­and­we­would­recommend­that­you­take­fi­nancial­and/or­tax­advice­as­to­the­implications­(including­tax)­of­investing­in­any­of­the­products mentioned herein.

This­material­may­not­be­reproduced­or­copies­circulated­without­prior­authority­of­UBS.­Unless­otherwise­agreed­in­writing­UBS­expressly­prohibits­the distribution and transfer of this material to third parties for any reason. UBS accepts no liability whatsoever for any claims or lawsuits from any third­parties­arising­from­the­use­or­distribution­of­this­material.­This­report­is­for­distribution­only­under­such­circumstances­as­may­be­permitted­by­applicable­law.­For­information­on­the­ways­in­which­CIO­manages­confl­icts­and­maintains­independence­of­its­investment­views­and­publication­off­ering,­and­research­and­rating­methodologies,­please­visit­www.ubs.com/research. Additional information on the relevant authors of this publi-cation­and­other­CIO­publication(s)­referenced­in­this­report;­and­copies­of­any­past­reports­on­this­topic;­are­available­upon­request­from­your­client advisor.

Options­and­futures­are­not­suitable­for­all­investors,­and­trading­in­these­instruments­is­considered­risky­and­may­be­appropriate­only­for­sophisti-cated­investors.­Prior­to­buying­or­selling­an­option,­and­for­the­complete­risks­relating­to­options,­you­must­receive­a­copy­of­“Characteristics­and­Risks­of­Standardized­Options”.­You­may­read­the­document­at­https://www.theocc.com/about/publications/character-risks.jsp­or­ask­your­fi­nancial­advisor for a copy.

Investing­in­structured­investments­involves­signifi­cant­risks.­For­a­detailed­discussion­of­the­risks­involved­in­investing­in­any­particular­structured­investment,­you­must­read­the­relevant­off­ering­materials­for­that­investment.­Structured­investments­are­unsecured­obligations­of­a­particular­issuer­with­returns­linked­to­the­performance­of­an­underlying­asset.­Depending­on­the­terms­of­the­investment,­investors­could­lose­all­or­a­sub-stantial­portion­of­their­investment­based­on­the­performance­of­the­underlying­asset.­Investors­could­also­lose­their­entire­investment­if­the­issuer­becomes­insolvent.­UBS­Financial­Services­Inc.­does­not­guarantee­in­any­way­the­obligations­or­the­fi­nancial­condition­of­any­issuer­or­the­accuracy­of­any­fi­nancial­information­provided­by­any­issuer.­Structured­investments­are­not­traditional­investments­and­investing­in­a­structured­investment­is­not­equivalent­to­investing­directly­in­the­underlying­asset.­Structured­investments­may­have­limited­or­no­liquidity,­and­investors­should­be­pre-pared­to­hold­their­investment­to­maturity.­The­return­of­structured­investments­may­be­limited­by­a­maximum­gain,­participation­rate­or­other­feature. Structured investments may include call features and, if a structured investment is called early, investors would not earn any further return and­may­not­be­able­to­reinvest­in­similar­investments­with­similar­terms.­Structured­investments­include­costs­and­fees­which­are­generally­embed-ded­in­the­price­of­the­investment.­The­tax­treatment­of­a­structured­investment­may­be­complex­and­may­diff­er­from­a­direct­investment­in­the­underlying­asset.­UBS­Financial­Services­Inc.­and­its­employees­do­not­provide­tax­advice.­Investors­should­consult­their­own­tax­advisor­about­their­own­tax­situation­before­investing­in­any­securities.

Important Information About Sustainable Investing Strategies:­Sustainable­investing­strategies­aim­to­consider­and­incorporate­environmen-tal,­social­and­governance­(ESG)­factors­into­investment­process­and­portfolio­construction.­Strategies­across­geographies­and­styles­approach­ESG­analysis­ and­ incorporate­ the­ fi­ndings­ in­ a­ variety­ of­ways.­ Incorporating­ ESG­ factors­ or­ Sustainable­ Investing­ considerations­may­ inhibit­ the­

12July 2020 – UBS House View Monthly Letter

portfolio­manager’s­ability­to­participate­in­certain­investment­opportunities­that­otherwise­would­be­consistent­with­its­investment­objective­and­other­principal­investment­strategies.­The­returns­on­a­portfolio­consisting­primarily­of­sustainable­investments­may­be­lower­or­higher­than­port-folios­where­ESG­factors,­exclusions,­or­other­sustainability­issues­are­not­considered­by­the­portfolio­manager,­and­the­investment­opportunities­available­ to­such­portfolios­may­diff­er.­Companies­may­not­necessarily­meet­high­performance­standards­on­all­aspects­of­ESG­or­sustainable­investing­issues;­there­is­also­no­guarantee­that­any­company­will­meet­expectations­in­connection­with­corporate­responsibility,­sustainability,­and/or impact performance.

Distributed­to­US­persons­by­UBS­Financial­Services­Inc.­or­UBS­Securities­LLC,­subsidiaries­of­UBS­AG.­UBS­Switzerland­AG,­UBS­Europe­SE,­UBS­Bank,­S.A.,­UBS­Brasil­Administradora­de­Valores­Mobiliarios­Ltda,­UBS­Asesores­Mexico,­S.A.­de­C.V.,­UBS­Securities­Japan­Co.,­Ltd,­UBS­Wealth­Management­Israel­Ltd­and­UBS­Menkul­Degerler­AS­are­affi­liates­of­UBS­AG.­UBS­Financial­Services­Incorporated­of­Puerto­Rico­is­a­subsidiary­of­UBS Financial Services Inc. UBS Financial Services Inc. accepts responsibility for the content of a report prepared by a non-US affi liate when it distributes reports to US persons. All transactions by a US person in the securities mentioned in this report should be eff ected through a US-registered broker dealer affi liated with UBS, and not through a non-US affi liate. The contents of this report have not been and will not be approved by any securities or investment authority in the United States or elsewhere. UBS Financial Services Inc. is not acting as a municipal advisor to any municipal entity or obligated person within the meaning of Section 15B of the Securities Exchange Act (the “Municipal Advisor Rule”) and the opinions or views contained herein are not intended to be, and do not consti-tute, advice within the meaning of the Municipal Advisor Rule.

External Asset Managers / External Financial Consultants:­In­case­this­research­or­publication­is­provided­to­an­External­Asset­Manager­or­an­External­Financial­Consultant,­UBS­expressly­prohibits­that­it­is­redistributed­by­the­External­Asset­Manager­or­the­External­Financial­Consultant­and­is made available to their clients and/or third parties.

Austria:­This­publication­is­not­intended­to­constitute­a­public­off­er­under­Austrian­law.­It­is­distributed­only­for­information­purposes­to­clients­of­UBS­Europe­SE,­Niederlassung­Österreich,­with­place­of­business­at­Wächtergasse­1,­A-1010­Wien.­UBS­Europe­SE,­Niederlassung­Österreich­is­subject­to­the­joint­supervision­of­the­European­Central­Bank­(“ECB”),­the­German­Central­Bank­(Deutsche­Bundesbank),­the­German­Federal­Financial­Services­Supervisory­Authority­ (Bundesanstalt­ für­Finanzdienstleistungsaufsicht),­as­well­as­of­ the­Austrian­Financial­Market­Authority­(Finanzmarktaufsicht),­ to­which­ this­publication­has­not­been­ submitted­ for­ approval.­UBS­Europe­SE­ is­ a­ credit­ institution­ constituted­under­­German­law­in­the­form­of­a­Societas­Europaea,­duly­authorized­by­the­ECB.­Bahrain:­UBS­is­a­Swiss­bank­not­licensed,­supervised­or­regulated­in­Bahrain­by­the­Central­Bank­of­Bahrain­and­does­not­undertake­banking­or­investment­business­activities­in­Bahrain.­Therefore,­clients­have­no­protection­under­local­banking­and­investment­services­laws­and­regulations.­Brazil:­This­publication­is­not­intended­to­constitute­a­public­off­er­under­Brazilian­law­or­a­research­analysis­report­as­per­the­defi­nition­contained­under­the­Comissão­de­Valores­Mobiliários­(“CVM”)­Instruction­598/2018.­It­is­distributed­only­for­information­purposes­to­clients­of­UBS­Brasil­Administradora­de­Valores­Mobiliários­Ltda.­and/or­of­UBS­Con-senso­Investimentos­Ltda.,­entities­regulated­by­CVM.­Canada:­In­Canada,­this­publication­is­distributed­to­clients­of­UBS­Wealth­Management­Canada­by­UBS­Investment­Management­Canada­Inc..­China:­This­report­is­prepared­by­UBS­Switzerland­AG­or­its­off­shore­subsidiary­or­affi­liate­(collectively­as­“UBS­Off­shore”).­UBS­Off­shore­is­an­entity­incorporated­out­of­China­and­is­not­licensed,­supervised­or­regulated­in­China­to­carry­out­banking­or­securities­business.­The­recipient­should­not­contact­the­analysts­or­UBS­Off­shore­which­produced­this­report­for­advice­as­they­are­not­licensed­to­provide­securities­investment­advice­in­China.­UBS­Investment­Bank­(including­Research)­has­its­own­wholly­independent­research­and­views­which­at­times­may­vary­from­the­views­of­UBS­Global­Wealth­Management.­This­report­shall­not­be­regarded­as­providing­specifi­c­securities­related­analysis.­The­recipient­should­not­use­this­document­or­otherwise­rely­on­any­of­the­information­contained­in­this­report­in­making­investment­decisions­and­UBS­takes­no­responsibility­in­this­regard.­Czech Republic:­UBS­is­not­a­licensed­bank­in­the­Czech­Republic­and­thus­is­not­allowed­to­provide­regulated­banking­or­investment­services­in­the­Czech­Republic.­Please­notify­UBS­if­you­do­not­wish­to­receive­any­further­correspondence. Denmark:­This­publication­is­not­intended­to­constitute­a­public­off­er­under­Danish­law.­It­ is­distributed­only­for­information­purposes­to­clients­of­UBS­Europe­SE,­Denmark­Branch,­fi­lial­af­UBS­Europe­SE,­with­place­of­business­at­Sankt­Annae­Plads­13,­1250­Copenhagen,­Denmark,­ registered­with­ the­Danish­Commerce­ and­Companies­Agency,­ under­No.­ 38­17­24­33.­UBS­ Europe­ SE,­Denmark­Branch,­ fi­lial­ af­UBS Europe­SE­is­subject­to­the­joint­supervision­of­the­European­Central­Bank­(“ECB”),­the­German­Central­Bank­(Deutsche­Bundesbank),­the­German­Federal­Financial­Services­Supervisory­Authority­(Bundesanstalt­für­Finanzdienstleistungsaufsicht),­as­well­as­of­the­Danish­Financial­Super-visory­Authority­(Finanstilsynet),­to­which­this­publication­has­not­been­submitted­for­approval.­UBS­Europe­SE­is­a­credit­institution­constituted­under­German­law­in­the­form­of­a­Societas­Europaea,­duly­authorized­by­the­ECB.­France:­This­publication­is­distributed­by­UBS­(France)­S.A.,­French­“société­anonyme”­with­share­capital­of­€­132.975.556,­69,­boulevard­Haussmann­F-75008­Paris,­R.C.S.­Paris­B­421­255­670,­to­its­clients­and­prospects.­UBS­(France)­S.A.­is­a­provider­of­investment­services­duly­authorized­according­to­the­terms­of­the­“Code­Monétaire­et­Financier”,­regulated­by­French­banking­and­fi­nancial­authorities­as­the­“Autorité­de­Contrôle­Prudentiel­et­de­Résolution”.­Germany: This publication is not intended­to­constitute­a­public­off­er­under­German­law.­It­is­distributed­only­for­information­purposes­to­clients­of­UBS­Europe­SE,­Germany,­with­place­of­business­at­Bockenheimer­Landstrasse­2-4,­60306­Frankfurt­am­Main.­UBS­Europe­SE­is­a­credit­institution­constituted­under­German­law­in­the­form­of­a­Societas­Europaea,­duly­authorized­by­the­European­Central­Bank­(“ECB”),­and­supervised­by­the­ECB,­the­German­Central­Bank­(Deutsche­Bundesbank)­and­the­German­Federal­Financial­Services­Supervisory­Authority­(Bundesanstalt­für­Finanzdienstleistungsaufsicht),­to­which­this publication has not been submitted for approval. Greece:­UBS­Switzerland­AG­and­its­affi­liates­(UBS)­are­not­licensed­as­a­bank­or­fi­nancial­institution­under­Greek­legislation­and­do­not­provide­banking­and­fi­nancial­services­in­Greece.­Consequently,­UBS­provides­such­services­from­branches­outside­of­Greece,­only.­This­document­may­not­be­considered­as­a­public­off­ering­made­or­to­be­made­to­residents­of­Greece.­Hong Kong: This­publication­is­distributed­to­clients­of­UBS­AG­Hong­Kong­Branch­by­UBS­AG­Hong­Kong­Branch,­a­licensed­bank­under­the­Hong­Kong­Bank-ing­Ordinance­and­a­registered­institution­under­the­Securities­and­Futures­Ordinance.­UBS­AG­Hong­Kong­Branch­is­incorporated­in­Switzerland­with limited liability. India:­UBS­Securities­India­Private­Ltd.­(Corporate­Identity­Number­U67120MH1996PTC097299)­2/F,­2­North­Avenue,­Maker­Maxity,­Bandra­Kurla­Complex,­Bandra­(East),­Mumbai­(India)­400051.­Phone:­+912261556000.­It­provides­brokerage­services­bearing­SEBI­Regis-tration­Number­ INZ000259830;­merchant­ banking­ services­ bearing­ SEBI­ Registration­Number:­ INM000010809­ and­ Research­Analyst­ services­bearing­SEBI­Registration­Number:­INH000001204.­UBS­AG,­its­affi­liates­or­subsidiaries­may­have­debt­holdings­or­positions­in­the­subject­Indian­company/companies.­Within­the­past­12­months,­UBS­AG,­its­affi­liates­or­subsidiaries­may­have­received­compensation­for­non-investment­banking­securities-related services and/or non-securities services from the subject Indian company/companies. The subject company/companies may have been­a­client/clients­of­UBS­AG,­its­affi­liates­or­subsidiaries­during­the­12­months­preceding­the­date­of­distribution­of­the­research­report­with­respect­to­investment­banking­and/or­non-investment­banking­securities-related­services­and/or­non-securities­services.­With­regard­to­information­on associates, please refer to the Annual Report at: http://www.ubs.com/global/en/about_ubs/investor_relations/annualreporting.html. Indonesia, Malaysia, Philippines, Thailand: This material was provided to you as a result of a request received by UBS from you and/or persons entitled to make the request on your behalf. Should you have received the material erroneously, UBS asks that you kindly destroy/delete it and inform UBS immediately.­Any­and­all­advice­provided­and/or­trades­executed­by­UBS­pursuant­to­the­material­will­only­have­been­provided­upon­your­specifi­c­request­or­executed­upon­your­specifi­c­instructions,­as­the­case­may­be,­and­may­be­deemed­as­such­by­UBS­and­you.­The­material­may­not­have­been­reviewed,­approved,­disapproved­or­endorsed­by­any­fi­nancial­or­regulatory­authority­in­your­jurisdiction.­The­relevant­investments­will­be­subject­to­restrictions­and­obligations­on­transfer­as­set­forth­in­the­material,­and­by­receiving­the­material­you­undertake­to­comply­fully­with­such­

13July 2020 – UBS House View Monthly Letter

restrictions­and­obligations.­You­should­carefully­study­and­ensure­that­you­understand­and­exercise­due­care­and­discretion­in­considering­your­investment­objective,­risk­appetite­and­personal­circumstances­against­the­risk­of­the­investment.­You­are­advised­to­seek­independent­professional­advice in case of doubt. Israel:­UBS­is­a­premier­global­fi­nancial­fi­rm­off­ering­wealth­management,­asset­management­and­investment­banking­services­from­its­headquarters­in­Switzerland­and­its­operations­in­over­50­countries­worldwide­to­individual,­corporate­and­institutional­investors.­In­Israel,­UBS­Switzerland­AG­is­registered­as­Foreign­Dealer­in­cooperation­with­UBS­Wealth­Management­Israel­Ltd.,­a­wholly­owned­UBS­subsid-iary.­UBS­Wealth­Management­Israel­Ltd.­is­a­Portfolio­Manager­licensee­which­engages­also­in­Investment­Marketing­and­is­regulated­by­the­Israel­Securities­Authority.­This­publication­is­intended­for­information­only­and­is­not­intended­as­an­off­er­to­buy­or­solicitation­of­an­off­er.­Furthermore,­this­publication­is­not­intended­as­an­investment­advice­and/or­investment­marketing­and­is­not­replacing­any­investment­advice­and/or­investment­marketing­provided­by­the­relevant­licensee­which­is­adjusted­to­each­person­needs.­The­word­“advice”­and/or­any­of­its­derivatives­shall­be­read­and­construed­in­conjunction­with­the­defi­nition­of­the­term­“investment­marketing”­as­defi­ned­under­the­Israeli­Regulation­of­Investment­Advice,­Investment­Marketing­and­Portfolio­Management­Law,­1995.­Italy:­This­publication­is­not­intended­to­constitute­a­public­off­er­under­Italian­law.­It­is distributed only for information purposes to clients of UBS Europe SE, Succursale Italia, with place of business at Via del Vecchio Politecnico, 3-20121­Milano.­UBS­Europe­SE,­Succursale­Italia­is­subject­to­the­joint­supervision­of­the­European­Central­Bank­(“ECB”),­the­German­Central­Bank­(Deutsche­Bundesbank),­the­German­Federal­Financial­Services­Supervisory­Authority­(Bundesanstalt­für­Finanzdienstleistungsaufsicht),­as­well­as­of­the­Bank­of­Italy­(Banca­d’Italia)­and­the­Italian­Financial­Markets­Supervisory­Authority­(CONSOB­-­Commissione­Nazionale­per­le­Società­e­la­Borsa),­to­which­this­publication­has­not­been­submitted­for­approval.­UBS­Europe­SE­is­a­credit­institution­constituted­under­German­law­in­the­form­of­a­Societas­Europaea,­duly­authorized­by­the­ECB.­Jersey:­UBS­AG,­Jersey­Branch,­is­regulated­and­authorized­by­the­Jersey­Financial­Services­Commission­for­the­conduct­of­banking,­funds­and­investment­business.­Where­services­are­provided­from­outside­Jersey,­they­will­not­be­covered­by­the­Jersey­regulatory­regime.­UBS­AG,­Jersey­Branch­is­a­branch­of­UBS­AG­a­public­company­limited­by­shares,­incorporated­in­Switzerland­whose­registered­offi­ces­are­at­Aeschenvorstadt­1,­CH-4051­Basel­and­Bahnhofstrasse­45,­CH­8001­Zurich.­UBS­AG,­Jersey­Branch’s­principal­place­business­is­1,­IFC­Jersey,­St­Helier,­Jersey,­JE2­3BX.­Luxembourg:­This­publication­is­not­intended­to­constitute­a­public­off­er­under­Luxembourg­law.­It­is­distributed­only­for­information­purposes­to­clients­of­UBS­Europe­SE,­Luxembourg­Branch,­with­place­of­business­at­33A,­Avenue­J.­F.­Kennedy,­L-1855­Luxembourg.­UBS­Europe­SE,­Luxembourg­Branch­is­subject­to­the­joint­supervision­of­the­European­Central­Bank­(“ECB”),­the­German­Central­bank­(Deutsche­Bundesbank),­the­German­Federal­Financial­Services­Supervisory­Authority­(Bundesanstalt­für­Finanzdienstleistung-saufsicht),­as­well­as­of­the­Luxembourg­supervisory­authority­(Commission­de­Surveillance­du­Secteur­Financier),­to­which­this­publication­has­not­been­submitted­for­approval.­UBS­Europe­SE­is­a­credit­institution­constituted­under­German­law­in­the­form­of­a­Societas­Europaea,­duly­authorized­by the ECB. Mexico:­This­information­is­distributed­by­UBS­Asesores­México,­S.A.­de­C.V.­(“UBS­Asesores”),­an­affi­liate­of­UBS­Switzerland­AG,­incorporated­as­a­non-independent­investment­advisor­under­the­Securities­Market­Law­due­to­the­relation­with­a­Foreign­Bank.­UBS­Asesores­is­a­regulated­entity­and­it­is­subject­to­the­supervision­of­the­Mexican­Banking­and­Securities­Commission­(“CNBV”),­which­exclusively­regulates­UBS­Asesores­regarding­the­rendering­of­portfolio­management,­as­well­as­on­securities­investment­advisory­services,­analysis­and­issuance­of­individual­investment recommendations, so that the CNBV has no surveillance faculties nor may have over any other service provided by UBS Asesores. UBS Asesores­is­registered­before­CNBV­under­Registry­number­30060.­You­are­being­provided­with­this­UBS­publication­or­material­because­you­have­indicated­to­UBS­Asesores­that­you­are­a­Sophisticated­Qualifi­ed­Investor­located­in­Mexico.­The­compensation­of­the­analyst(s)­who­prepared­this­report­ is­determined­exclusively­by­research­management­and­senior­management­of­any­entity­of­UBS­Group­to­which­such­analyst(s)­render­services. Nigeria:­UBS­Switzerland­AG­and­its­affi­liates­(UBS)­are­not­licensed,­supervised­or­regulated­in­Nigeria­by­the­Central­Bank­of­Nigeria­or­the­Nigerian­Securities­and­Exchange­Commission­and­do­not­undertake­banking­or­investment­business­activities­in­Nigeria.­Poland: UBS is a premier­global­fi­nancial­services­fi­rm­off­ering­wealth­management­services­to­individual,­corporate­and­institutional­investors.­UBS­is­established­in­Switzerland­and­operates­under­Swiss­law­and­in­over­50­countries­and­from­all­major­fi­nancial­centres.­UBS­Switzerland­AG­is­not­licensed­as­a­bank­or­as­an­investment­fi­rm­under­Polish­legislation­and­is­not­permitted­to­provide­banking­and­fi­nancial­services­in­Poland.­Portugal: UBS Switzerland­AG­is­not­licensed­to­conduct­banking­and­fi­nancial­activities­in­Portugal­nor­is­UBS­Switzerland­AG­supervised­by­the­portuguese­regulators­(Bank­of­Portugal­“Banco­de­Portugal”­and­Portuguese­Securities­Exchange­Commission­“Comissão­do­Mercado­de­Valores­Mobiliários”).­Singapore: This material was provided to you as a result of a request received by UBS from you and/or persons entitled to make the request on your behalf. Should you have received the material erroneously, UBS asks that you kindly destroy/delete it and inform UBS immediately. Clients of UBS­AG­Singapore­branch­are­asked­to­please­contact­UBS­AG­Singapore­branch,­an­exempt­fi­nancial­adviser­under­the­Singapore­Financial­Advis-ers­Act­(Cap.­110)­and­a­wholesale­bank­licensed­under­the­Singapore­Banking­Act­(Cap.­19)­regulated­by­the­Monetary­Authority­of­Singapore,­in­respect­of­any­matters­arising­from,­or­in­connection­with,­the­analysis­or­report.­Spain: This publication is not intended to constitute a public off­er­under­Spanish­law.­It­is­distributed­only­for­information­purposes­to­clients­of­UBS­Europe­SE,­Sucursal­en­España,­with­place­of­business­at­Calle­María­de­Molina­4,­C.P.­28006,­Madrid.­UBS­Europe­SE,­Sucursal­en­España­is­subject­to­the­joint­supervision­of­the­European­Central­Bank­(“ECB”),­the­German­Central­bank­(Deutsche­Bundesbank),­the­German­Federal­Financial­Services­Supervisory­Authority­(Bundesanstalt­für­Finanz-dienstleistungsaufsicht),­as­well­as­of­the­Spanish­supervisory­authority­(Banco­de­España),­to­which­this­publication­has­not­been­submitted­for­approval.­Additionally­it­is­authorized­to­provide­investment­services­on­securities­and­fi­nancial­instruments,­regarding­which­it­is­supervised­by­the­Comisión­Nacional­del­Mercado­de­Valores­as­well.­UBS­Europe­SE,­Sucursal­en­España­is­a­branch­of­UBS­Europe­SE,­a­credit­institution­constituted­under­German­law­in­the­form­of­a­Societas­Europaea,­duly­authorized­by­the­ECB.­Sweden: This publication is not intended to constitute a pub-lic­off­er­under­Swedish­law.­It­is­distributed­only­for­information­purposes­to­clients­of­UBS­Europe­SE,­Sweden­Bankfi­lial,­with­place­of­business­at­Regeringsgatan­38,­11153­Stockholm,­Sweden,­registered­with­the­Swedish­Companies­Registration­Offi­ce­under­Reg.­No­516406-1011.­UBS­Europe­SE,­Sweden­Bankfi­lial­is­subject­to­the­joint­supervision­of­the­European­Central­Bank­(“ECB”),­the­German­Central­bank­(Deutsche­Bundes-bank),­ the­German­Federal­Financial­Services­Supervisory­Authority­ (Bundesanstalt­ für­Finanzdienstleistungsaufsicht),­as­well­as­of­the­Swedish­supervisory­authority­(Finansinspektionen),­to­which­this­publication­has­not­been­submitted­for­approval.­UBS­Europe­SE­is­a­credit­ institution­constituted­under­German­law­in­the­form­of­a­Societas­Europaea,­duly­authorized­by­the­ECB.­Taiwan: This material is provided by UBS AG, Taipei Branch­in­accordance­with­laws­of­Taiwan,­in­agreement­with­or­at­the­request­of­clients/prospects.­UAE: UBS is not licensed in the UAE by the Central­Bank­of­UAE­or­by­the­Securities­&­Commodities­Authority.­The­UBS­AG­Dubai­Branch­is­licensed­in­the­DIFC­by­the­Dubai­Financial­Services­Authority­as­an­authorised­fi­rm.­UK:­This­document­is­issued­by­UBS­Wealth­Management,­a­division­of­UBS­AG­which­is­authorised­and­regulated­by­the­Financial­Market­Supervisory­Authority­in­Switzerland.­In­the­United­Kingdom,­UBS­AG­is­authorised­by­the­Prudential­Regulation­Authority­and­is­subject­to­regulation­by­the­Financial­Conduct­Authority­and­limited­regulation­by­the­Prudential­Regulation­Authority.­Details­about­the­extent­of­regulation­by­the­Prudential­Regulation­Authority­are­available­from­us­on­request.­A­member­of­the­London­Stock­Exchange.­This­publi-cation­is­distributed­to­retail­clients­of­UBS Wealth­Management.

Version­A­/­2020.­CIO82652744©­UBS­2020.­The­key­symbol­and­UBS­are­among­the­registered­and­unregistered­trademarks­of­UBS.­All­rights­reserved.