Wealthy investors are feeling increasingly optimistic following Donald Trump’s election to be the next U.S. president, UBS Wealth Management Americas reported Thursday.
Investors are pulling out of their defensive stance following Trump’s close victory and stock market’s rebound.
UBS polled some 1,200 affluent and high-net-worth investors in mid-October and again immediately after the election to determine changes in their sentiment and mindset.
The survey found that since the election, 48% of investors felt optimistic about the 12-month economic outlook, up from 39% three weeks earlier.
Optimism about Trump’s influence on the stock market also surged after the positive post-election market returns. Beforehand, only a quarter of investors had expected positive returns for the S&P 500 over the next six months if Trump won. Now, more than half expect positive returns.
UBS said this rise reflected a sharp increase in optimism about market returns among Trump supporters, from 25% before the election to 65% afterward, that outweighed a decline among Clinton supporters, from 57% to 34%.
“Before the election, we saw many investors adopt a defensive stance, raising cash and moving away from stocks,” Paula Polito, client strategy officer of UBS WMA, said in a statement. “With the election behind us, many investors are looking ahead with a growing sense of optimism about the economy and the markets.”
Enter the Outsider
The UBS poll found that Trump’s being an outsider to the Washington establishment was critical to his election. Ninety percent of respondents said Washington needed disruption, and 66% believed a Trump presidency would be a catalyst for change.
Asked which candidate would better address their top issues, majorities gave the nod to Trump on the economy, healthcare and U.S. national security and to Clinton on foreign policy.
Before the election, 55% of investors reported making portfolio changes to protect their money. Thirty percent increased cash, and 25% shifted to a more conservative asset allocation. Only 9% increased investments in the U.S. stock market.
Following the election, only 15% of investors said they planned to shift to a more conservative allocation, while 17% said they would increase investments in the stock market.
Overall, four in 10investors said they intended to make changes to their portfolios, mostly based on their political preferences.
Thirty-three percent of Trump supporters planned to increase investments in the U.S. stock market and 25% to increase personal spending, while 28% of Clinton supporters said they were raising cash and 27% shifting to a more conservative allocation.
Nearly two-thirds of those investors holding cash said they were waiting for a market dip before reinvesting, and 40% said they were waiting for more clarity on the president-elect’s policies.
Trump supporters in the survey said they expected several benefits from his election: 73% fewer regulations, 70% a greater sense of national security and 62% improved infrastructure.
One third of all investors, including nearly half of Trump supporters, expected their taxes to decrease under Trump. If this happens, 45% said they would increase investments, 28% would spend more and 30% would make more donations to charity.
(A pre-election analysis by the Tax Policy Center estimated that Trump’s tax plan would reduce individual charitable giving by 4.5% to 9%, or between $14 billion and $26 billion in 2017.)
Among Clinton supporters, 87% said they were highly concerned about what Trump would do in office, 82% worried that the rest of the world would view America negatively and 56% expressed concern about the potential for an economic recession.
Trump’s temperament continued to concern all investors in the survey. Sixty percent viewed his biggest potential mistakes as engaging in personal attacks, 58% starting another war and 46% failing to accept criticism gracefully.
How Advice Can Help
Before the November vote, a big majority of investors made election-related financial decisions on their own, often guided by their personal feelings about the candidates, according to the survey.
Those who discussed the election with their advisor, on the other hand, said they felt less likely to base their decision on emotion and were more confident about their portfolio.
UBS’s post-election survey showed that 57% of investors with a financial advisor planned to discuss the election’s portfolio implications with them.
They said they wanted advice on their overall asset allocation, financial planning and how Trump’s policy changes might affect them. One third said they were looking for advice on reinvesting cash.
“The main thing now is not to make emotional, reactive decisions based on the election outcome,” Sameer Aurora, head of client strategy for UBS WMA, said in the statement. “That’s where a financial advisor can add a great deal of perspective.”
Among investors who had already discussed the election with their advisor, 84% reported feeling more confident about their portfolios and 85% less likely to make an emotion-based financial decision.