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Wealthy Investors Worried About Inflation, Rate Hikes: UBS

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What You Need to Know

  • Fifty-four percent of investors expect elevated inflation to last more than 12 months, and 62% among U.S. investors.
  • Still, 62% of global respondents expressed confidence in the stock market over the next six months.
  • Seventy-eight percent of business owners surveyed said they remain confident in their businesses over the next 12 months.

Inflation and interest rate increases are top of mind for high-net-worth investors around the world, according to UBS’ quarterly investor sentiment survey, released Tuesday. 

UBS conducted the survey in January among 3,000 investors with at least $1 million in investable assets and 1,200 business owners with at least $1 million in annual revenue and at least one employee other than themselves. The global sample was split across 15 markets.

Higher prices for goods, fuel and energy are worrying investors everywhere, with 54% expecting elevated inflation to last more than 12 months, and 62% among U.S. investors.

Despite waning optimism, 62% of global respondents expressed confidence in the stock market over the next six months. Many see an opportunity to borrow and make portfolio changes.

Two-thirds of investors reported that they hold more than 10% of their portfolio in cash; of those, about half said they are waiting for the right opportunity to invest. Sixty-three percent of those who do choose to invest see technology as an attractive sector, while 59% like health care.

“With the effects of COVID-19 expected to impact the healthcare industry for years to come and a shift to a more digitalized world, investors see further opportunities in these sectors,” Iqbal Khan, president of UBS Europe, Middle East and Africa and co-president of UBS Global Wealth Management, said in a statement. 

“However, given high levels of inflation and interest rate hikes on the horizon, investors are waiting for the right moment to put their money to work.”

Seventy-eight percent of business owners surveyed said they remain confident in their businesses over the next 12 months, despite citing the pandemic, rising material costs and business tax increases as sources of concern. 

Forty-four percent reported that they are also looking to hire, and 48% said they are interested in investing more in their business. 

The survey found that businesses are changing their traditional operating models to meet employee demands. Sixty-nine percent are offering increased flexibility in working hours, and 67% are offering increased flexibility in where their employees can work.

“The pandemic and the ‘Great Resignation’ that followed encouraged business owners to adapt to the current environment and change their perspective on flexibility in the workplace,” Tom Naratil, president of UBS Americas and co-president of UBS Global Wealth Management, said in the statement. 

Regional Findings

U.S.

Inflation concerns have come to the fore and worries over tax increases have taken a back seat for U.S. investors. Eighty-two percent want the Biden administration to prioritize controlling inflation.

Amid the market volatility, U.S. investors are considering adding stocks and portfolio hedges, putting cash to work and borrowing ahead of potential rate rises, in the form of new and refinanced mortgages, and security-backed loans.

Latin America

Latin American investors’ short-term optimism has dipped, with 58% in the new survey saying they feel optimistic about the region’s economy and 59% feeling optimistic about the short-term outlook for stocks in their region. 

The dip in optimism has affected their investment plans as well. Fifty-two percent plan to invest more in the next six months, down eight percentage points from the third quarter.

Europe (except Switzerland)

European investor optimism has fallen nearly 10 percentage points since the third quarter, with 68% of European investors feeling optimistic about the region’s economy in the short-term. Short-term optimism in stocks has fallen as well, with 43% planning to invest more in the next six months.

Switzerland

Unlike that of their European counterparts, Swiss investor optimism is up from the third quarter, with 68% feeling optimistic about their economy in the short term, a 12-point increase. Sixty-eight percent of Swiss investors said they are optimistic about Swiss stocks, up from 46%. 

Despite their confidence in the market, investors remain cautious in the near term, with only a third planning to invest more in the next six months.

Asia Pacific

In Asia, short-term optimism on their own economy is at 63%, on par with the third quarter. Sixty-three percent of Asian investors remain optimistic about the six-month outlook for stocks in their region, and 38% plan to invest more in the next six months.