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With Cash Holdings High, Investors Look to Buy Stocks: UBS

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What You Need to Know

  • The survey found 70% of investors perceived technological transformation as a top theme over the next six months.
  • Overall, 69% of investors surveyed were optimistic about their region’s economy in the next 12 months.
  • And 61% of U.S. investors expected inflation to rise in the next three years, the highest of any region.

Cash forms 22% of individual investors’ portfolios globally, down just 3 percentage points since September, according to UBS’s quarterly investor sentiment survey, released Wednesday.

UBS noted that the high cash weightings contrast with positive market and economic developments over that period — the rally in stocks, rollout of vaccines and improvement in economic indicators. 

However, 41% of investors surveyed said they are considering increasing their exposure to stocks in the next six months, compared with 12% who intend to cut their exposure and 47% who wish to keep their portfolios the same. 

Seventy percent of investors perceived technological transformation as a top theme over the next six months. Sixty-four percent said stocks are an effective way to diversify portfolios during the recovery, and 63% viewed sustainable investing as a promising opportunity. 

Three in 4 respondents expressed some or a lot of concern that cash will take a performance hit if inflation rises too much. Forty-one percent said they would increase their stock holdings in that scenario, and 31% said they would increase their real estate positions. 

“Investors’ cash holdings are still far higher than our recommended allocations, especially given the current market and economic environment, so it is encouraging that they are looking to invest more in equities,” Tom Naratil, president of UBS Americas and co-president of UBS Global Wealth Management, said in a statement. 

“If inflation picks up, the value of cash will be eroded in real terms, and investors will be forced to look to other asset classes to help meet their financial goals.” 

Iqbal Khan, president of UBS Europe, Middle East and Africa and co-president of UBS Global Wealth Management, noted in the statement that UBS expects sustainable and thematic investments to remain an important means of diversifying portfolios away from traditional stock and bond allocations.

UBS conducted the survey from March 30 to April 18 among 2,850 investors with at least $1 million in investable assets and 1,150 business owners with at least $1 million in annual revenue and at least one employee other than themselves. The global sample was drawn from 14 markets: Argentina, Brazil, France, Germany, Hong Kong, Italy, Japan, mainland China, Mexico, Singapore, Switzerland, the UAE, the U.K., and the U.S.

Regional Sentiment

Overall, 69% of investors in the survey were optimistic about their region’s economy over the next 12 months, compared with 60% in the poll taken three months ago. Seventy percent were optimistic about the stock market outlook for the next six months, compared with 61% in the previous survey.

In addition, 80% of business owners were optimistic about their own business on a 12-month view, versus 72% three months ago. Thirty-seven percent planned to hire more, up five points, compared with 13% who were preparing to downsize, down four points. 

More on this topic

Investors and business owners globally see the Biden administration as a tailwind for the global outlook over the next four years. Sixty-four percent see the administration as having a positive impact on the global economy, 60% feel it will support global markets, and 57% view it as benefiting their personal finances. Fifty-four percent of business owners view it as a boost for their companies. 

Meanwhile, 63% of U.S. investors expect a positive economic effect from the Biden administration. Half think the president will be a positive influence on global markets, while 21% say it will be negative. Nearly half think he should prioritize infrastructure over the next four years.

The UBS survey found that U.S. investors’ confidence in their own economy grew more than in any other region, with 70% expressing optimism, compared with 52% three months ago. Optimism on stocks shot up from 59% to 71%. 

Sixty-one percent of U.S. investors said they expected inflation to rise over the next three years, the highest of any region. 

Three in 5 Latin American investors remain optimistic on stocks and on their own economy, despite strong political and economic headwinds to the region’s recovery. Half expect inflation to rise over the next three years, the third highest number globally. 

European investors outside Switzerland have grown more confident in their region’s economy and in the stock market. In particular, 73% said they were optimistic on stocks, the highest percentage globally. 

The region’s investors were also the least likely among survey respondents to hold more than 10% in cash, with only 53% of total respondents doing so. 

Swiss respondents’ outlook on their own economy jumped 12 points over the quarter, with 57% of investors expressing optimism. Confidence in the stock market also rose by the biggest margin globally, to 67% from 54% in the prior survey. 

Sixty-nine percent of Asian investors expressed optimism about their region’s economy. They also grew even more confident in the stock market, with 69% expressing optimism, compared with 61% three months ago. 

(Photo: Shuttershock)