UBS Quarterly Market Outlook

UBS, Yield & Income 4th Quarter Outlook: October 31, 2005.

* Economic forecasts:
According to the UBS economics group, core CPI is likely to rise to
2.6% this quarter, up from 1.5% last quarter. Although GDP growth
remains firm, despite higher energy prices, profit margins are likely
peaking and earnings growth is set to slow in 2006. Given the outlook
for higher inflation and continued moderate economic activity, the Fed
is likely to raise the funds rate to 4.25% by year-end.

* Market outlook:
Continued upward pressure on the short end combined with higher
inflation expectations should push 10-year Treasury note yields to 5%
by year-end. Credit spreads are narrow on a historical basis and are
biased wider in 2006. We forecast a year-end 2006 S&P 500 fair value
target of 1,260-1,320 despite modestly slowing growth, higher
inflation expectations, and expected earnings disappointments.

* Sector recommendations:
With modest market gains expected over the next 12 months, dividends
will likely be a significant component of total return. We recommend
closed-end funds within the senior loan group and we prefer MLPs with
strong cash distribution growth. We recommend floating-rate preferreds
and upgrading credit quality among preferred stock holdings and we
continue to overweight lodging REITs.