UBS Investor Sentiment Survey: Investors Eye Stocks And Real Assets In Anticipation Of Rising Inflation

Almost half of investors believe inflation will accelerate over the next 12 months and plan to adjust their portfolios accordingly by buying more stocks and real assets, according to UBS’s quarterly Investor Sentiment survey of individual investors and business owners globally.

Specifically, the survey found that 35% of investors plan to add stocks, 33% plan to add precious metals, 32% plan to add sustainable investments, and 32% are planning to add real estate. While inflation is a concern, global investor optimism remains high on their own region’s economy for the next 12 months (70%) and stock market performance over the next six months (67%).

Similarly, UAE investors are expecting to feel the impact of inflation, with 46% of investors, which were surveyed, thinking that inflation will accelerate over the next 12 months and 92% of them anticipating that the rise of inflation will have an impact on their portfolio.

To counteract the effects expected to accompany inflation, 35% of UAE investors are showing interest in real-estate, whereas 34% of them are considering sustainable investments, and 32% of them are considering portfolio hedges. Additionally, eighty-three percent of UAE investors showed confidence in the stock market and 47% expressed their intentions as result to increase their allocation to stocks in the coming six months.

Tom Naratil, President of UBS Americas and Co-President of UBS Global Wealth Management, said:

“Though we expect the recent rise in inflation to ease, the outlook for inflation remains uncertain and therefore building inflation protection into portfolios is an appropriate step for investors to be taking now. This includes investing in commodities, private market infrastructure, and stocks with pricing power, as these areas tend to perform better in an inflationary environment and will help to preserve purchasing power over the long term.”

Iqbal Khan, President of UBS Europe, Middle East and Africa and Co-President of UBS Global Wealth Management, said: “The Delta variant is leading to renewed worries about lockdowns, inflation has proven to be higher and longer lasting than many – among them the Fed – thought, and US/China tensions are resurfacing. It’s no wonder that we see some nervousness and uncertainty amongst investors, particularly in the US and Asia. Our view is that there will be no return to national lockdowns and we’ll see inflation recede in the second half, meaning the Fed won’t need to withdraw stimulus. This should be positive for the re-opening of economies, recovery trades and many of the secular growth winners.”

Ali Janoudi, Head of Wealth Management Middle East and Africa at UBS said: “Investors in the UAE are looking for investment opportunities to protect their purchasing power against inflation, with many eyeing real estate and sustainable investments. They are also optimistic about their own region’s economy. We believe a continued risk-on stance in equities is warranted and sustainable investing is our preferred approach to investing globally.”

While investors in the UAE remain optimistic, their top concern is COVID-19 (66%), closely followed by both climate change(62%) and cybersecurity(61%).

Globally, business owner optimism remained high, but is down slightly by three percentage points, with 77% optimistic about their own business over the next 12 months. As a result, plans to hire are also down with 35% planning to actively hire versus 37% last quarter. Fifty three percent of business owners plan to keep their workforce the same. Forty-two percent plan to invest more in their business versus 47% that plan to invest the same, showing signs of stability.

Business owners see an array of potential benefits in sustainability over the next three years. Sixty-one percent believe sustainability could generate more revenue, 57% believe it could improve client relationships and 55% believe it could do the same for employee relationships. Still, 51% think it will increase costs.

United States

Looking ahead, US investors are the most optimistic on their region’s economy (69%). At the same time, US investors believe inflation will accelerate over the next 12 months (57%), more than any other region.

Latin America

Though other regions have higher scores, Latin American investors are optimistic on their region’s economy over the next 12 months (67%), and optimism has increased 7% since 1Q21. Thirty-nine percent of investors expect inflation to accelerate over the next 12 months, the second lowest number globally.

Europe (ex. Switzerland)

A majority of European investors outside of Switzerland remain optimistic on their region’s economy over the next 12 months (75%) – the highest figure among the five regions surveyed. Forty-eight percent of investors believe inflation will accelerate over the next 12 months.

Switzerland
Swiss investors have increasingly become more optimistic on their region’s economy (74%) – a 17% increase over the last quarter. Forty-six percent believe inflation will accelerate over the next 12 months.

Asia

Sixty-six percent of Asian investors are optimistic on their region’s economy over the next 12 months. Only 38% of Asian investors believe that inflation will accelerate over the next 12 months.

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