In a note, Michael Ryan, head of wealth management research Americas for UBS Wealth Management, says: “We retain our pro-risk stance with overweights to US equity, with our preferences for mid-cap stocks and cyclical sectors, as well as our continued focus on US high-yield credit.”

The failure of US president Barack Obama and his Republican opponents in the House of Representatives to agree a budget deal, raising the threat of a breach in the country’s “debt ceiling” and triggering a default, has been cited in some quarters as a potentially heavy blow to the world economy.

So far, however, UBS says, investors have been mostly unaffected by the shutdown to the US Federal government; the S&P 500 Index of shares is down only slightly since last week and US Treasury bond yields are largely unchanged.

“But as the government shutdown continues and we also approach that point when Treasury has exhausted all means of forestalling a breach of the debt ceiling, the stakes will rise. Our view remains despite the lack of a clear pathway to reaching a compromise, it remains our view that neither a government shutdown nor a debt ceiling showdown will undermine the economic expansion or threaten market stability,” UBS said.

“While the last debt ceiling showdown appears to have had a significant impact upon financial markets, it’s important to note that this also occurred against a backdrop of a fragile domestic economy and a full blown sovereign debt crisis in the eurozone. With the US economy now on firmer footing and the eurozone having moved beyond the acute phase of the crisis, the prospects for a replay this time around are more limited,” UBS continued.

The Swiss bank said “investors should look beyond the current DC-inspired drama and focus once more upon gradually improving US growth prospects, a still supportive monetary policy backdrop and fair levels of market valuation when making investment decisions.”

UBS concluded that it is retaining its overweight stances on US equities and high-yield debt.