Traders should look past brewing US-China tensions and stay invested in stocks in 2021, says the world's biggest wealth manager

• Legislation passed by Congress that may increase US-China trade tensions shouldn't scare investors away from stocks, according to UBS's Mark Haefele.
• The chief investment officer of UBS's global wealth management unit told clients that the vaccine-led equity rally is likely to continue, and a prospective bill preventing Chinese companies from listing their shares on US exchanges won't surprise markets.
• He added: "We see further upside with progress on vaccine approvals, the prospect of an additional US fiscal package, and expectations of a more pragmatic and multilateral approach to China from the incoming US administration likely to support markets."
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Recent legislation passed by Congress that could increase US-China tensions shouldn't wave investors off stocks, according to UBS's chief investment officer of global wealth management, Mark Haefele.

On Wednesday, Congress passed bipartisan legislation that could prevent Chinese companies from listing their shares on US exchanges unless they follow US auditing standards. Donald Trump is expected to sign the bill into law, but the specifics of the legislation shouldn't be a surprise for markets, said Haefele. He also said "there appears to be room for US-China regulatory negotiations that could avert a raft of delistings."

He recommends investors stay in stocks as the vaccine-led rally is likely to continue, but also said investors should diversify their exposure across asset classes and regions.

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However, Haefele cautioned that the US-China trade conflict is nowhere near resolved. He sees a US-China strategic rivalry persisting in 2021, particularly in the technology space.

"We see a continued move toward a more bipolar tech world centered on the two countries, which for example will increase the amount of investment in enabling technologies such as 5G," said the CIO.

To brace for this, Haefele reiterated his recommendation to invest within emerging technology themes including 5G, fintech, healthcare, and greentech.

Haefele added: "But despite these near-term uncertainties, we see further upside with progress on vaccine approvals, the prospect of an additional US fiscal package, and expectations of a more pragmatic and multilateral approach to China from the incoming US administration likely to support markets."

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