Wealthy investors worldwide are more worried about the investment environment next year than in the years following for the rest of that decade.
According to a new UBS Investor Watch survey of 3,400 investors worldwide, 55% expect a big market drop before the end of 2020 and 79% see higher volatility ahead, but 70% are optimistic about their portfolios over the next decade.
Given their pessimistic near-term outlook, investors are holding 25% of their portfolios in cash and 60% say they would consider adding more cash.
U.S. investors hold slightly less cash in their portfolios — 21% — but were almost as willing to increase cash holdings in the future.
Frank Bonanno, managing director of StoneCastle Cash Management, says large cash holdings among investors threatens their relationships with advisors. “Cash has become the gateway asset class to attract individuals away from their RIA relationship…. RIAs not speaking to clients about cash will lose that cash to banks and other competition.”
In addition to holding lots of cash, investors surveyed expect to boost their holdings of high-quality stocks and increase diversification to protect their portfolios.
The UBS survey also found that geopolitical issues are top concerns among all investors, though the political environment and presidential election place higher on the worry list for U.S. investors, who comprised almost one-third of respondents.
About half of U.S. investors surveyed cited those concerns versus about 40% of other investors. The U.S.-China trade conflict is equally concerning for all investors, cited by 44%.
U.S. investors also differ from other investors in other ways: They are less interested and less invested in sustainable investing and less drawn to aligning their portfolios with future mega trends.
Seventy percent of U.S. investors are interested in sustainable investing versus more than 80% of investors in other regions, including 96% in Latin America, according to the survey, whose respondents have a net worth of more than $1 million excluding their primary residence.
Eighty-two percent of U.S. investors want to align their portfolios with anticipated trends versus 85% or more of investors in other regions, including 97% in Latin America. In all regions, younger investors are the most interested in sustainable investments and investment alignment with mega trends. Investors 51 or older are the least interested in both approaches.
The mega trends of interest to investors are, in declining order of importance, aging populations, smart technology, increased automation, artificial intelligence and diminishing natural resources.
All respondents surveyed have a net worth of more than $1 million excluding their primary residence.