UBS Group AG announced on Friday that it has lowered its recommended allocation for U.S. equities to neutral, citing potential underperformance risks as economic growth accelerates in other parts of the world.

Strategists Andrew Garthwaite and Marc el Koussa noted in a report that the rationale for this adjustment includes the relatively low sensitivity of U.S. corporate earnings to global growth, elevated valuations, ongoing capital diversification outside the U.S., and downside risks for the U.S. dollar.

They stated, "The U.S. has the lowest operational leverage among major regions, which historically leads to underperformance when global growth exceeds 3.5%."

UBS projects global GDP growth to reach 3.4% by 2026.

As returns from large-cap technology stocks decline and domestic policy uncertainty prompts investors to seek alternatives, capital continues to flow out of U.S. equity markets.

A weaker U.S. dollar, which recorded its worst annual performance since 2017 last year, has also contributed to the shift.

The strategists added, "Based on our marketing efforts in North America, it is clear that capital is moving globally."

"ETF flow data indicates that diversification is already underway."

Despite this, due to the sheer size of the U.S. market, its weighting remains substantial even on a benchmark index basis—U.S. stocks account for over 70% of the MSCI World Index.