Photo: Bloomberg TV
There’s a lot of uncertainty in the air. On the front of everyone’s mind is the eurozone debt crisis. The immediate concern is whether Greece will exit the euro and whether that exit will be disorderly.Such an unprecedented event, which many consider to be low probability, has economists and equity strategists heading for the trenches.
Jonathan Golub, UBS’s top U.S. equity strategist, is one of the many names who recommend that investors approach the markets with caution.
However, all of this caution has given birth to an unusual type of risk: upside risk. In other words, there’s a risk that people are being too conservative, potentially missing out on significant gains.
As stated earlier, our revenue and EPS forecasts are predicated on the view of UBS economists and strategists that there will not be a disorderly exit of Greece from the Euro, and that the U.S. economy will grow 2.3% in 2012 and 2.6% the following year.
That said, we believe the most significant risk is to the upside. As noted earlier, we have built a cushion into our projections to reflect the potential for a negative impact on earnings from global risks. In other words, our estimates are conservative given the forecasts of UBS U.S. and global economists as well as the current economic consensus.
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