There is a spring in the step of wealthy investors and business owners globally, with a majority holding sizable cash and optimistic about 2019 as markets rebound and opportunities present. Business owners are among the most positive, a new UBS poll found.
UBS Global Wealth Management's quarterly Investor Sentiment, which polled investors across 17 countries, showed sentiment way up in the first three months of 2019 as markets recovered from their dismal showing in late 2018. While respondents said that a large proportion of assets remained in cash, many were ready to invest, the survey found.
Their outlook for the global economy also stoked cheer.
Half of investors polled (51 per cent) felt optimistic about the global economic outlook against 21 per cent still feeling last year’s gloom. There was similar strong confidence among business owners about global and regional growth prospects.
The equities rebound in early 2019 translated into more bullish sentiment for stocks. Roughly half were optimistic about investing in local and global equity markets, with three-quarters seeing recent volatility as an opportunity rather than a call to hold and wait.
The picture wasn’t entirely bright, with geopolitics still weighing on investors’ minds. Some 44 per cent said that domestic politics was a top concern, with 40 per cent worried about national debt.
The insights come from the Swiss wealth manager's poll of 3,653 investors and business owners in March 2019 with at least $1 million in investable assets or a minimum of $250,000 in annual business revenues. The sample was split across Brazil, China, Germany, Hong Kong, Indonesia, Italy, Japan, Malaysia, Mexico, the Philippines, Singapore, Switzerland, Taiwan, Thailand, the UAE, the UK, and the US.
The poll determined that roughly a third of holdings were in cash, with US and Swiss investors holding the lowest at 23 per cent and 31 per cent of portfolios respectively. Asia and Latin America held 36 per cent in cash and Europe 35 per cent.
"Cash is a safe asset for a liquidity strategy but a risky one for longevity. Right now, we see high levels of cash globally," UBS Wealth Management client strategy officer, Paula Polito, said. "This is a good time for investors to consider a more diversified portfolio."
Looking for where to unlock that cash, the poll found that just 26 per cent of US investors were ready to allocate. Conversely, Latin America and Asia were the most likely regions to increase investment. Half of those polled plan to invest more in the next six months, with signs that sustainable investing is gaining ground, making up 27 per cent of the portfolio mix, up from a 22 per cent share five years ago.
How regions break down
US investors showed the biggest home bias, with 56 per cent feeling good about their own economy but just over a third feeling the same way about the global picture. The report warned that while US investors have gained from over-allocating to domestic stocks in recent years, the home bias could hurt future returns. “US stocks are priced in line with long-term averages, but international equity markets are more cheaply valued,” it said.
Latin American investors were the most positive about their domestic economic outlook and the picture globally, although many were anxious about domestic politics and rising inflation.
Asia's biggest worry remains trade frictions and a regional slowdown in China. But roughly two-thirds said they were optimistic about the strength of the global economy and regional growth, counting China’s engine as a leading factor. For those planning to allocate for Asian equities, the report recommended that investors “diversify beyond China into other regional markets with catch-up potential.”
Beset by disappointing growth, political uncertaintly, and weak market returns, Europe holds some of the highest cash, but once there is sufficient to meet short-term liquidity, “we believe there are better ways for them to protect and grow their wealth,” the report said.
"'Buy local' works well for vegetables, but we are more optimistic on the global economy and this survey confirms investors sometimes focus too much on their home region. Diversification is still the best way to access opportunities and side-step domestic risks,” chief investment officer at UBS Global Wealth Management, Mark Haefele, said.