UBS Equities-Global Equity Strategy _Quantitative Framework and Positioni...-119411433

ab23 December 2025Global ResearchGlobal Equity StrategyQuantitative Framework and PositioningEach month, we update the three key parts of our quantitative framework:1) Scorecards − Our individual scorecards rank sectors based on valuations, sensitivity to our UBS macro scenario, earnings momentum, price momentum (where extreme), positioning and quality fundamentals. The composite scorecard combines all these factors into one overall score.2) Earnings versus Trend − We look at the EPS versus trend to evaluate one element of earnings risk as well as the fit with trend.3) Machine Learning − This looks at which macro variables are the most important to the relative sector returns by refitting and training a machine learning model on a three-month rolling basis. The variables we look at are largely daily macro proxies (such as 2-10 Yield Curve, Hard Data, AI Narrative, China Proxy, Soft Data, US 10y breakeven and US 10y real yield) and are supplied by Sean Simonds (see Tactical Dashboard). This quantitative framework constitutes only one part of our overall weightings analysis.Regions: This was covered in Part 1 of our outlook. The FTSE has moved to the top of our regional aggregate scorecard (up one place). Japan, where we remain underweight, is now second (down one place). It scores top on our MCI scorecard, but we see a sharp tightening of monetary conditions relative to other regions, and it also has the highest operational leverage (thus suffers from the UBS view of a weaker PMI and weaker dollar, near term). GEM now ranks third, supported by stronger economic and earnings momentum. We are overweight tactically GEM (focussing on Brazil and China). Europe is in fourth place, on the back of deterioration in earnings momentum (ranks a clear bottom, down one place), but it is the cheapest region on our valuation scorecard. The US, where we are a small overweight, is at the bottom of the aggregate scorecard due to extreme valuations, but it ranks top if we exclude valuation.Sectors: On the cyclical side, we are overweight financials – banking on banks in Europe and in Japan (see here), domestic Europe (budget airlines and retailing) and electrification theme. We are marginally overweight of tech – but now much more selective. We are overweight defensives that are abnormally cheap and not too disrupted highlighting US healthcare equipment, which ranks second on our aggregate scorecard, household products (ranks 3rd) and flavouring companies. We lifted luxury to overweight.Crowding: The most crowded region (relative to history) is the US, and the least crowded is Europe. The most crowded sectors (rel. to history) are Autos, Real Estate & Semis. The least crowded are Food Producers, Paper and Beverages. Market Direction: Not covered in this scorecard but in part 1 of our outlook.The tactical signals are now neutral, having suggested consolidation in early November , we stick to a 1090 MSCI AC World end-26 target and see at least a 35% chance of a bubble