Economic

US investors look to update portfolios amid growing economic concerns

Geopolitics jumps to top of investor concerns

The war in Ukraine carries on and is now well into its third month. It has been contributing to inflation, market volatility, and recession fears. Investors are concerned about both the humanitarian crisis and potential economic fallout. Should markets decline further, investors may look to make changes to their portfolios.

Geopolitics jumped 13 percentage points since the last Investor Sentiment survey, making it the second biggest investor concern. Although optimism in the US economy increased slightly, investors are seeing several negative economic impacts of the war. These include higher energy prices (70%), an increase in cyberattacks (67%), more global instability (66%), and increased risk of a recession (62%).

In response, most investors are considering taking action on their portfolios: 30% said they would shift their investments to different sectors, 26% would add investments, and 19% would decrease investments. The remaining 25% said they are not considering any portfolio changes. Those who would increase investments are interested in US stocks (37%) and commodities, like gold and oil.

Notably, investors are hopeful that the outcome of the war could lead to a stronger NATO alliance (85%), decreased Russian influence (82%), more confidence in democracy (72%), and more investment in green energy (70%).

Aside from geopolitics, concerns on investors’ minds include US politics (61%), inflation (59%), national debt (57%), and tax increases (54%).

Investors see energy and tech sectors as attractive in a volatile market

Russia’s invasion of Ukraine has reverberated around global markets and contributed to the recent spike in volatility, which is likely to remain at least in the near term, according to the UBS Chief Investment Office (CIO).

Investors are in agreement, with half saying they believe volatility is higher than usual. They see several sectors and themes as most attractive in the current environment. More than half of investors view energy as a promising investment, and CIO believes that a sharper focus on energy security will be a longer-term focus of the war.

Another area of focus for investors is technology (54%). CIO sees opportunities in quality tech companies that enjoy strong free cash flows or high shareholder yields. Defense, healthcare, and consumer staples are also among the sectors investors are interested in.

Election views

Investors are looking ahead to the midterm US House and Senate elections that will take place in November. Preferences for the outcome are split fairly evenly between Republican control (38%), Democratic control (31%), and equal control among both parties (31%). CIO thinks investors wondering how to navigate an election year should stay focused on the Fed and fundamentals, consider winners of the policy environment despite gridlock, and be prepared to manage through volatility. For more on the market and investment implications of the midterm elections, read the report ElectionWatch: The balance of power.

Business owners pull back on investment plans

US business owners remain confident in their own businesses, despite tempering plans to hire and invest in their companies. 77% are optimistic about their own business, but less than half (39%) are planning to hire or invest more in those businesses (42%).

The top concerns weighing on their minds can likely be attributed to inflation and the ongoing war: rising healthcare costs (67%), rising material costs (67%), wage inflation (66%), geopolitical instability (66%), and business tax increases (66%).

Meanwhile, those who are investing are focused on increased employee benefits and compensation (40%), data analytics (38%), IT spending (37%), improving sustainability (35%), and remote work (32%).

Click here for resources exclusively for entrepreneurs, founders, and business owners.

View the infographic to explore more findings from the UBS Investor Sentiment US 1Q 2022 survey, 4 May 2022.

Main contributor: Kerry Breen

About the survey: UBS surveyed 900 investors and 500 business owners in the US with at least $1M in investable assets (for investors) or at least $1M in annual revenue and at least one employee other than themselves (for business owners), from April 5 – 18, 2022. For the February results, UBS surveyed 900 investors and 500 business owners in the US, from January 11 – 24, 2022.

Disclosures

This article is for informational and educational purposes only and should not be relied upon as investment advice or the basis for making any investment decisions. The views and opinions expressed may not be those of UBS Financial Services Inc. UBS Financial Services Inc. does not verify and does not guarantee the accuracy or completeness of the information presented.

As a firm providing wealth management services to clients, UBS Financial Services Inc. offers investment advisory services in its capacity as an SEC-registered investment adviser and brokerage services in its capacity as an SEC-registered broker-dealer. Investment advisory services and brokerage services are separate and distinct, differ in material ways and are governed by different laws and separate arrangements. It is important that you understand the ways in which we conduct business, and that you carefully read the agreements and disclosures that we provide to you about the products or services we offer. For more information, please review the client relationship summary provided at ubs.com/relationshipsummary, or ask your UBS Financial Advisor for a copy.

UBS Financial Services Inc. is a subsidiary of UBS AG. Member FINRA. Member SIPC.

Review code: IS2202543

Leave a Reply

Your email address will not be published.

Back to top button