Speaking at the World Economic Forum in Davos on Tuesday, UBS Group CEO Sergio Ermotti told CNBC that he does not “see any path of normalization” in market volatility over the near term. Ermotti underscored that the bank’s risk management teams have been preparing for sustained swings in equity and credit spreads, pointing out that UBS’s market risk exposure has been stress-tested against a 25% decline in global stock indices. He emphasized that clients should maintain a diversified liquidity buffer, noting that the bank currently holds 10% of its total invested assets in cash equivalents to navigate ongoing turbulence. Ermotti’s comments highlight UBS’s cautious stance on deploying additional capital into risk-weighted assets until volatility subsides.

In a separate discussion with Bloomberg’s Jonathan Ferro at the same forum, Ermotti asserted that “diversifying away from America is impossible,” citing the size and liquidity of US Treasury markets, which account for roughly 45% of global sovereign debt trading volumes. He noted that even European and Asian sovereign bond indices maintain a significant weighting—over 30%—in US debt instruments. For UBS’s global wealth-management division, which oversees CHF 4.3 trillion in client assets, the implication is clear: advisors must integrate US rate and credit outlooks into portfolio construction. Ermotti warned that any attempt to underweight US exposure could erode expected returns by up to 150 basis points annually, based on UBS’s internal back tests over the past decade.