Optimism among high-net-worth investors has dipped to early-pandemic levels on continuing concerns about the economic and market impact of inflation and the war in Ukraine, particularly on their retirement savings, a new survey finds.
Nearly three out of four investors are now worried about making bad investment decisions in the current environment and are holding onto cash, according to the latest quarterly Investor Sentiment survey from UBS. Nonetheless, they see potential investment opportunities if markets decline further, and are highly interested in energy security, smart mobility and automation/robotics as long-term investment themes.
The survey covered over 2,800 investors and 1,100 business owners across 14 markets.
“Investors across the globe are concerned about the combination of higher inflation, the war in Ukraine and the potential for a recession,” says Iqbal Khan, president of UBS Europe, Middle East, and Africa and co-president of UBS Global Wealth Management. “In challenging times like this, it’s important that investors continue to seek expert guidance and perspectives to understand the environment and potential opportunities to support their liquidity, longevity and legacy needs.”
In contrast, business owner optimism has rebounded after the largest drop in two years, and most business owners plan to continue to hire workers and invest in their businesses over the next 12 months. Nearly half of business owners expect to raise prices in the next six months, driven by rising materials costs and concerns over wage inflation.
In Asia-Pacific, optimism is holding steady and remains the highest across all regions with six in 10 investors feeling confident in the stock market and their economy. Investors in the region are interested in longer-term investment themes including energy security and smart mobility.
In the United States, however, short-term investor optimism on the economy and stock market plunged to 39% and 37%, respectively, from 58% in May.
If markets decline a further 10%, younger investors are much more likely to increase their investment allocation to the markets (38% among millennials and younger) than older investors (18% among boomers and older). Looking ahead to the mid-term elections, the most important issues to US high-net-worth-investors are the economy (85%), followed by healthcare (74%), taxes (72%) and social security (71%).
Meanwhile, short-term optimism among Latin American investors has held up better than in the US, with 53% feeling optimistic about the economy and the stock market in their region versus 60% in the prior period. Their optimism is driven by a sense of a return to normalcy, continuing strong consumer demand, as well as potential opportunities to capitalize on dips in the market cycle.
Across Europe, optimism about the stock market and the economy among high-net-worth-investors is down 10 and 15 percentage points respectively, from May levels to 50%. Europeans who are optimistic cite as reasons the strength in company earnings, employment and consumer demand.