UBS Investor Watch: Unpredictability
A major study of high net worth individuals in seven different markets has provided a detailed view of the attitudes, fears and hopes of wealthy people around the world.
Zurich, 17 May 2017 – UBS Wealth Management asked 2,842 high net worth individuals globally*, including 400 in Switzerland, for their views on political and economic uncertainty, after a rollercoaster year that has included the election of President Trump, the Brexit vote in the UK, and rising tensions over North Korea.
In Switzerland, 77% of this hard-to-reach group think this is the most unpredictable period in the history of the world – the lowest of any market surveyed. However, nearly three-quarters (71%) are suffering from information overload as they make decisions to navigate this uncertainty. 70% admit short-term distractions and unforeseen events keep getting in the way of their financial plans.
Emotions, say most millionaires, are now more important than objective facts in shaping public opinion. 72% believe elected governments can only respond to short-term dangers.
Nearly half think new technologies like Artificial Intelligence (41%) can make the world more predictable but views on social media are clear – only 18% believe it helps make the world more predictable.
Yet despite all this, the number of millionaires who are optimistic about their and the world’s future far outweighs those who are pessimistic. According to the UBS Confidence Index, 56% of millionaires in Switzerland feel optimistic and confident about the future, compared to just 9% who are pessimistic (The remainder did not anticipate a change).
Switzerland’s wealthy are also optimistic for the wider economy. Just over half (53%) feel positive about the global economic outlook over the next 12 months – the second most optimistic nation in the world.
Part of the reason for that confidence is the belief that they can find safe places to invest in an uncertain environment. 78% see their domestic market as a safe place to invest. However, 70% of Swiss millionaires are concerned about the volatility of the Swiss Franc.
UBS Wealth Management recommends three tactics to help deal with unpredictability:
- Focus on the long term. Avoid responding to short-term events or distractions. Cutting through this noise has never mattered more, because there has never been so much of it.
- Maintain a diversified portfolio. Exposure to a broad range of assets and geographies is essential. It helps to avoid the risks of domestic biases. Adding alternative investments can provide another source of protection against global and regional uncertainty while offering attractive yield opportunities in the mid to longer term.
- Be wary of overestimating the safety of cash. Cash may always be attractive, especially in an unpredictable world. But inflation erodes its value, meaning that cash assets can damage your financial health in the long term.
Daniel Kalt, UBS Chief Economist Switzerland and Regional Chief Investment Officer Switzerland, UBS Wealth Management, said: “Some people would argue the world is easier to predict than ever. The world’s wealthy clearly feel the opposite. After a year of uncertain events and high profile shocks, most believe we live in a very unpredictable age. Political, economic, societal and financial risks are all prominent in people’s minds.
“In response, we see evidence of short-termism creeping in, people reacting to each event as uncertainty grows. Investing on your own doorstep can be tempting in this climate. Holding onto cash can feel safer, even as it erodes your wealth in real terms. Although confidence remains high, neither approach is likely to work well in the long-term.
“In an unpredictable world, it remains best to look to the long-term, focus on your goals and invest in a balanced portfolio across a range of assets and locations.”
Millionaires say it’s the most unpredictable time in history
- 82% of millionaires across seven international markets think the current period is the “most unpredictable” ever. In Switzerland, this is 77% - less than any other global market
- Wealthy are distracted by short-term risk and suffering from information overload, study finds
- 76% think emotions are now more important than objective facts in shaping public opinion, and 82% say the global financial system is a cause of global uncertainty
- 58% expect an improvement in their finances in the next 12 months compared to just 7% who expect a decline. Most are confident that they can find safe places to invest their money
- A total of 2,842 high net worth individuals were interviewed in the UK, Italy, Switzerland, Japan, Hong Kong, Singapore and Mexico
Notes to Editors:
About the research
* The cited research was conducted among 2,842 high net worth individuals around the world with at least USD 1 million investable assets (excluding property). The global sample was split evenly across seven markets: UK, Italy, Switzerland, Mexico, Hong Kong, Singapore and Japan. At least 400 were surveyed in each market, at least 30% of whom were women. The research was conducted by Censuswide on behalf of UBS Wealth Management and was carried out between January 2017 and February 2017.
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