UBS Global Wealth Management's Chief Equity Strategist, Andrew Garthwaite, has reduced the rating for US stocks within a fully invested global equity portfolio to "benchmark." The decision was driven by concerns over a weakening US dollar, elevated valuations, and increasing risks stemming from policy uncertainty in Washington.

Garthwaite identified currency risk as a primary concern. UBS forecasts that the euro will rise to 1.22 against the US dollar by the end of the first quarter and views the greenback as facing "asymmetric structural downside risks." Historically, the bank noted, a 10% decline in the trade-weighted US dollar index has resulted in US equities underperforming by approximately 4% on an unhedged basis.

This year, international markets have significantly outperformed the US, as a weaker dollar and lower valuations attract capital overseas. The MSCI World ex-US Index has risen about 8% year-to-date, while the S&P 500 has remained nearly flat.