The decision by British voters to part ways with the European Union has not altered the "fairly benign" macroeconomic backdrop for Australian equities, according to UBS.
In a note on Australian equities, UBS strategists David Cassidy and Dean Dusanic said the uncertainty created by the Brexit vote is a "passing phase of risk aversion" rather than a precursor to a global bear market.
"Financial sector concerns are evident in the performance of UK and Euro banks, but broad measures of system stress are relatively contained," said the note.
The only medium-term change for investment markets to factor in is a delay in the US Federal Reserve's plan to hike interest rates, said UBS.
"UBS has shifted its rate hike assumption from September to December this year while the market is pricing a very minimal probability of the Fed hiking at all this year," said the note.
As for Australian interest rates, UBS still expects the Reserve Bank of Australia to cut rates in August, following the release of the second quarter CPI figures.
According to UBS, Australian equities could actually benefit from Brexit volatility.
"Investors could also refocus back on the Australian market as a relative safe haven, particularly given its attractive yield characteristics and still fairly benign macro backdrop," the note said.
"Further to this line of reasoning, domestically focused stocks may gain interest due to what appear to be relatively benign fundamentals. Banks appear to tick both boxes in terms of attractive yield and exposure to a still benign domestic macro backdrop.
"Consumer discretionary stocks may also attract renewed interest given the still reasonable earnings backdrop against considerable global uncertainty," said UBS.
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