There are no safe assets but diversify anyway, UBS CEO Ermotti says

[DAVOS] Diversification is even more important now for investors, although there are “no safe assets,” according to UBS Group boss Sergio Ermotti.

“Honestly, there is no choice to the US dollar,” Ermotti said during a panel at the World Economic Forum in Davos on Wednesday (Jan 21). While he sees value in global equities, he added that asset prices are inevitably tied to geopolitical issues.

Earlier on Wednesday, Ermotti warned that “diversifying away from America is impossible” given its economic might, after AkademikerPension became the first European pension fund to vow to sell its US government debt holdings.

On the panel about the future of artificial intelligence, Ermotti remained positive about the long-term benefit from the technology.

However, there is a difference “between the potential of the technology and where valuations are,” said Harvard Professor Gita Gopinath.

“A point I wanted to make when we talk about equities in comparison to the dotcom period; the scale of exposure is much more,” Gopinath added. “So any correction, regardless of the size of the correction, the consequences of that for the world economy are larger this time around than back then.”

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In the near-term, former International Monetary Fund economist Gopinath said weakness in the US dollar and fiscal stimulus may drive inflation higher in the US. Affordability is a key concern for US voters in the lead-up to the midterm elections in November. BLOOMBERG