High net worth individuals and business owners globally are optimistic and looking for opportunities to invest as markets rebound in 2019, according to UBS Global Wealth Management’s new quarterly Investor Sentiment survey.
The survey, which polled more than 3,600 wealthy investors and entrepreneurs in 17 countries, including the UAE, points to a rebound in bullish sentiment in the first three months of 2019 as markets recovered from the late-2018 slump. While respondents held a large proportion of their assets in cash, many expressed willingness to invest it, results show.
With 83% of UAE investors optimistic about the local economy, and 78% expressing optimism on the global economy, the Gulf state registers as the most bullish of all regions surveyed. UAE investors hold similarly optimistic views on equities, with 80% of respondents in favour of local stocks. They are also among the most likely to have plans to invest more, second only to Latin American investors.
Globally, fifty-one percent of investor respondents were optimistic on the global economy versus 21% who were pessimistic. Business owners were especially positive, with 62% optimistic and 15% pessimistic. Even more, 60% of investors and 68% of business owners, expressed optimism on their own region’s economy.
Investors globally were also bullish on stocks, albeit not as bullish as UAE investors. Fifty-six percent expressed optimism on stocks in their own regions versus 49% on stocks globally. In addition, 74% saw recent market volatility as an investment opportunity, compared with 67% who were still concerned about volatility witnessed in the fourth quarter of last year.
Forty-two percent of investors planned to invest more in the next six months versus 17% who planned to invest less. Sustainable investing was also cited as a growing interest, making up 27% of portfolios versus 22% five years ago.
Business owners were equally bullish. Globally, 74% were optimistic on their business; 37% planned to invest more versus 10% who planned to invest less; and 31% intended to hire more over the next 12 months versus 12% who intended to downsize.
Domestic concerns and cash holdings remain elevated
On the negative side, investors expressed worries about domestic issues. Some 44% cited their country’s politics as a top concern and 40% cited their national debt. In the UAE, investors’ top concerns were the possibility of a global trade war, market volatility and inflation.
Investors’ cash holdings also remained high. On average, 32% of portfolios globally were allocated to cash. US and Swiss investors’ cash holdings were lower. Holdings in both Asia and Latin America were 36%. In Europe, they were 35%.
In the UAE, cash levels were similarly high with 32%. However, US investors were also least likely to invest more, at 26% of respondents, while Latin American and Asian investors were the most likely, at 66% and 54%, respectively.
Paula Polito, Client Strategy Officer at UBS Global Wealth Management, says: “Cash is a safe asset for a liquidity strategy but a risky one for longevity. Right now, we see high levels of cash globally. This is a good time for investors to consider a more diversified portfolio.”
Ali Janoudi, Head of Central and Eastern Europe, Middle East and Africa at UBS Global Wealth Management, says: “It is encouraging to see such optimism paired with a strong desire to invest from UAE respondents. The findings confirm our view that the UAE should be considered a growth region for our business.”
Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, says: “‘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.”
US investors exhibited the biggest risk of home bias, with 56% optimistic on their own region’s economy versus 37% on the global economy – although 56% were also concerned about their country’s politics and 49% about the national debt.
Conversely, Latin American investors appeared less likely to exhibit home bias, with 78% optimistic on the economy both globally and in their home region – although concern about national politics was also high at 63%, behind inflation at 67%.
Asian investors cited fears about trade wars and a regional slowdown in China as their prominent concerns, at 46% and 43% of respondents, respectively. However, Asian investors still showed a risk of home bias, with 59% optimistic on the global economy versus 66% on their region amid strong performance in China in particular.
European investors have been beset by disappointing growth, political uncertainty, and weak financial market returns. They also have some of the highest holdings in cash. But once they have sufficient cash to meet their short-term liquidity needs, we believe there are better ways for them to protect and grow their wealth.