Wealthy investors shift to cash amid market volatility, UBS survey shows

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Optimism among wealthy investors is at its lowest levels since the start of the pandemic as worries about geopolitics and the impact inflation will have on markets and the economy are encouraging larger holdings of cash, according to UBS.

In its quarterly Investment Sentiment survey of more than 2,800 high net-worth investors and 1,100 business owners across 14 countries, the Switzerland-based wealth manager said that nearly three out of four investors are now worried about making bad investment decisions in the current environment.

Global stock markets have endured a difficult 2022 . Despite the rally of recent weeks, the MSCI World index 990100, -0.76% is down 17.7% as investors fret that tighter monetary policy to combat inflation will cause a contraction in many developed economies and crimp corporate profits.

“Investors across the globe are concerned about the combination of higher inflation, the war in Ukraine and the potential for a recession,” said Iqbal Khan, co-president of UBS Global Wealth Management.

The survey showed that 57% of respondents considered inflation their main concern, up 3 percentage points from the previous poll. Geopolitical risk, domestic politics, recession and a market downturn were other notable sources of angst.

Source: UBS

Indeed, 43% of investors said inflation was causing them to hold off from making big purchases and that despite sharply rising prices, respondents on average had cash holdings of 23%, up 1 percentage point since May.

High cash levels reflect a reluctance to put money to work in the market, with 56% of investors perceiving volatility to be higher than usual. At 70%, up 19 percentage points since May, U.S. respondents were the most wary of volatility. The figure for Asia was just 37%.

Such caution may explain why only 30% of investors said they would increase investments if the market fell 10%, while 56% would maintain their levels and 14% would decrease their holdings.

Despite this, those polled expressed a desire for longer-term investment themes, such as energy security, smart mobility and automation.

Source: UBS