Once Again, UBS AM Gets Into the Minds of Top Central Bank Leaders With a New Edition of Its UBS Annual Reserve Manager Survey
After gathering the views of 40 monetary institutions, the main conclusion of the report is that geopolitics has displaced monetary policy as one of the most relevant issues of the moment.
“This year, the shift from monetary policy to geopolitics was palpable. There was much less talk about inflation or interest rate paths, and much more about scenario planning for global disruptions. The widespread concern over a possible resumption of the trade war under a second Trump administration stood out most. Nearly three-quarters of reserve managers identified this as the main global risk, ahead of inflation or rate volatility. That says a lot about current sentiment,” says Max Castelli, Head of Strategy and Advice for Global Sovereign Markets at UBS Asset Management.
According to Castelli, this year’s conversations felt less like forecasting and more like “contingency planning.” “Reserve managers know the playbook has changed: they’re not just reacting to volatility—they’re repositioning for a world where fragmentation is the norm, not the exception,” he notes.
He also acknowledges that what struck him most was the “quiet urgency” with which they are acting. “Reserve managers aren’t panicking, but they are preparing. From FX hedging strategies to liquidity buffers, there’s a clear sense that the coming years won’t look like the last ten. In a context of high uncertainty, there is a marked rise in pessimism among central banks; for instance, they now consider stagflation to be just as likely as the soft landing that was generally expected in last year’s survey,” he states.
Key Findings
In this context, it is notable that 86% of respondents expect that the MAGA agenda (tariffs, deregulation, lower taxes, cheap energy, and DOGE-style cost cutting) will not succeed in boosting the U.S. economy in the long term. Instead, reserve managers believe that several key factors that made the U.S. the preferred destination for international asset allocators may be at risk:
65% believe that the independence of the Federal Reserve is at risk.
47% think there could be a deterioration in the rule of law significant enough to influence reserve managers’ asset allocation decisions.
29% see a risk to the openness of U.S. capital markets.
When Sharing Their View on Economic and Financial Outlooks, Respondents Showed a Notable Increase in Pessimism
40% expect the U.S. headline CPI to be in the 3%–4% range within a year, and more than 80% believe the Fed’s interest rates will also fall within that range during the same period.
When it comes to risks, the most frequently mentioned word is geopolitics, which has now taken center stage in central banks’ concerns, displacing economic issues. Evidence of this shift is seen in the fact that 74% of reserve managers identify an escalation of the trade war as the main risk, followed by a rise in military conflicts (51%).
Implications for Asset Allocation
So how does this translate into asset allocation? According to the survey, reserve managers remain well diversified in public markets, but the trend toward greater diversification appears to have peaked. In this regard, gold continues to show strong demand and is expected to offer the best risk-adjusted returns over the next five years.
Emerging market debt, corporate bonds, and particularly green bonds were also frequently mentioned as assets that central banks plan to incorporate over the next year. At the same time, the trend toward increasing equity exposure is slowing.
Another key data point is that 80% of respondents expect the U.S. dollar to remain the global reserve currency, although there are clear signs of diversification toward other currencies, with the euro being the primary beneficiary.
“The dollar is not favored, but reserve managers are uncertain. There are no true alternatives. Most central banks surveyed expect the U.S. dollar to remain weak, although they remain skeptical about whether this signals the start of a prolonged trend. Dollar weakness is not unprecedented, given the extended period of strength,” notes Castelli.
Sentiment toward the renminbi (RMB) also appears to be improving slightly. In this regard, Castelli adds: “While demand for U.S. assets is more vulnerable, the U.S. dollar is still widely expected to remain the dominant reserve currency (79% of respondents). The euro is seen as the most likely to benefit from macroeconomic and geopolitical shifts over the next five years (74%), followed by the renminbi (59%) and, perhaps surprisingly, digital currencies ranked third (44%).”
Lastly, the survey highlights the trend of digital assets—including cryptocurrencies and stablecoins—which were mentioned as one of the asset classes expected to benefit most from the current geopolitical environment, just after the euro and the renminbi.
