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UBS: The US-China war may wipe 20% of the S&P 500
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Loading...Investors may see a sharp decline in global stock markets if tensions between China and the United States turn into a real trade war, according to UBS analysts.
In fact, almost all trade between the US and China is affected by tariffs, the Swiss bank has calculated that S & P gains will reach 14.6% growth, with the US and global growth by 245 and 108.5 basis points respectively.
However, the bank notes that there will also be minor effects. These "will be bigger, as US multinationals doing business in China can also be affected." Thus, from the point of view of companies' ratings, this would result in an additional 9.1 percent impact, resulting in a total decline of 21.3 percent for the US benchmark.
"I think we will have potentially more tariffs imposed on China at the end of the month or early September," said David Riley, chief investment strategist at Bluebay Asset Management.
UBS analysts warn that capital investors are not prepared for this scenario, mainly due to recent US and European leaders' statements.
"Shares are still not depreciating, and we see a 20% drop due to a combination of lower incomes and multiple shrinks (which means that markets will start to pay much less for the same amount of revenue)", note UBS.
Source: CNBC
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