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UBS, the world's largest wealth management group, told its clients to be bearish on stocks and sell off over trade war fears.

UBS wealth management oversees more than $2.4 trillion in assets on behalf of wealthy clients.

Mark Haefele, UBS' global chief investment officer, said: "We do not see this as the best environment for taking risk on stocks."

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UBS Wealth Management, the world's largest wealth manager with more than $2.4 trillion under management, just turned bearish on equities, trimming its core equity recommendation to underweight.

While the US is likely to avoid a recession in 2020, "Downside risks are increasing for both the global economy and markets," said Mark Haefele, UBS' global chief investment officer, in the note dated August 26. "With talks between the US and China dominating market moves over the near term, investors should brace for higher volatility."

"We do not see this as the best environment for taking risk on stocks," said Haefele, who runs investment policy and strategy for $2 trillion in invested assets for the firm.

With an "underweight" rating, UBS is signaling that clients should hold a smaller proportion of assets and diversify portfolios. UBS manages the largest amount of private wealth in the world — about half of the world's billionaires are reported to be clients.

Read more: The 15 biggest wealth managers in the world

According to the Financial Times, UBS has not moved to "underweight" since the eurozone crisis in 2012, adding to the fears of a global economic slowdown.

Fears of looming tariffs amid an escalating trade war between the US and China have whipsawed markets and spooked investors this year.

"The trade dispute is moving fast and could improve as swiftly as it has deteriorated. But the threat to both the global economy and markets is clearly increasing," Haefele said.

UBS is bullish on some assets: "We continue to favor carry strategies in credit and foreign exchange markets, which benefit from central bank easing in a low growth environment."

The note said that the wealth manager is overweight the Indian rupee and Indonesian rupiah versus "the lower yielding" Australia and Taiwan currencies.

UBS wrote that it will monitor political, market, economic, and policy developments in "this highly fluid situation."

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