Investors are waiting for the right opportunity: UBS

Inflation and interest rate hikes are some of the key concerns for high-net-worth investors globally, according to the new quarterly Investor Sentiment Survey from UBS Global Wealth Management.

The survey, which polled 3,000 investors and 1,200 business owners across 15 markets globally, found that higher goods, fuel and energy prices have investors worried, with many believing elevated inflation will last more than 12 months. While economic optimism has waned slightly, investors remain confident in the stock market over the next six months, with many seeing an opportunity to borrow and make portfolio changes.

Stock market volatility clearly has made a lasting impression on investors in the UAE, where 95 per cent reported that they want more guidance than usual from their advisors on how to navigate the current environment. Their major concerns are how to manage risk (87 per cent), followed by seeking ideas on how they could diversify into private markets, for instance through private equity investments.

Globally, two thirds of investors hold more than 10 per cent of their portfolio in cash and, of those, nearly half claim to be “waiting for the right opportunity” to invest. If they do choose to invest, six out of 10 investors see technology (63 per cent) and healthcare (59 per cent) as very attractive sectors.

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

How do you feel about your country's economy right now? In our #UBSInvestorSentiment survey, 67% of investors told us they're optimistic about their region's economy for the short-term. Learn how they're planning to invest moving forward. #shareUBS

— UBS (@UBS) November 7, 2021

Business owners remain confident in their businesses over the next 12 months, despite citing Covid-19, rising material costs and business tax increases as sources of concern. Forty-four per cent are also looking to hire and almost half are interested in investing more in their business. Furthermore, businesses are changing their traditional operating models to meet employee demands. Sixty-nine per cent are offering increased flexibility in working hours and 67 per cent 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,” said Tom Naratil, president of UBS Americas and co-president of UBS Global Wealth Management.

Investor sentiment across the world

The US
Concerns over tax increases have taken a back seat this quarter and inflation concerns have come to the fore, most notably for investors who want the current administration to make controlling inflation a key priority (82 per cent). US investors also think that inflation will continue through 2022, with almost half concerned about a market downturn. Amid the market volatility, 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
In Latin America, short-term optimism is down from the third quarter in 2021, with six in 10 (58 per cent) investors feeling optimistic about the region’s economy, and 59 per cent of investors 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 per cent plan to invest more in the next six months, down from 60 per cent in the third quarter.

Europe (ex. Switzerland)
European investor optimism has fallen nearly 10 percentage points since the third quarter in 2021, with 68 per cent 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 per cent planning to invest more in the next six months.

Switzerland
Unlike the rest of their European counterparts, Swiss investor optimism is up from last quarter, with 68 per cent feeling optimistic about their economy in the short-term, a 12 percentage points increase from last year’s third quarter. Sixty-eight per cent of Swiss investors are optimistic about Swiss stocks, up from 46 per cent in the third quarter. Despite their confidence in the market, investors remain as cautious in the near term, with only three in 10 planning to invest more in the next six months.

Asia Pacific
In Asia, short-term optimism on their own economy is at 63 per cent, similar to the third quarter last year. Six in ten (63 per cent) Asian investors remain optimistic about the six-month outlook for stocks in their region, and nearly four in ten (38 per cent) plan to invest more in the next six months.