UBS AM: Central Banks See No Full US-China Decoupling
Despite ongoing disputes and geopolitical risks, nearly all central banks and reserve managers believe that the US and China will maintain an ongoing trade relationship, according to a survey by UBS Asset Management.
According to a survey by UBS Asset Management involving responses from 40 central banks and reserve managers, nearly all (91 percent) think there will be an ongoing trading relationship between the US and China, despite existing tensions. Only 6 percent believe in a total collapse of trade ties.
Outside of US-China relations, central banks are also optimistic. 94 percent of respondents expect a moderate outcome from recent trade disputes with multiple agreements between the US and large trading blocks as well as moderate levels of tariffs.
View on Trump 2.0
On Donald Trump’s second presidential term, there was little confidence that commitments will be fulfilled.
86 percent expect that the MAGA (Make America Great Again) agenda of tariffs, deregulation, lower taxes, cheap energy and DOGE cost-cutting will not succeed in providing a long-term boost to the US economy. In fact, 43 percent anticipate that the US will have experienced a technical recession or worse by June 2026.
The biggest Trump-related concerns are an erosion of the independence of the Federal Reserve (65 percent), followed by a weakening of the rule of law (47 percent) and a deterioration in the quality of US economic data (47 percent).
Gold and the Dollar
In terms of asset allocation, the survey confirmed surging demand for gold. 36 percent of survey participants reported an increase in gold in the past year, while more than half (52 percent) indicated they would like to add gold on a net basis over the next 12 months. Two-thirds see the precious metal as the best-performing asset class over the next five years compared to just 21 percent in the previous year.
On the dollar, 35 percent see continued USD-centric central bank currency diversification while 31 percent project a move towards a multipolar setup with additional concentration in the euro and renminbi. However, the average share of dollar holdings remains flat at 56 percent, up from 55 percent last year.
The survey findings were presented at the 31st edition of the annual Reserve Management Seminar (RMS) hosted by UBS Asset Management in Wolfsberg, Switzerland.
