- Investors worldwide are holding “elevated levels” of their assets in cash, says UBS Global Wealth Management.
- The firm said 41% of investors are considering putting cash to work in stocks over the next six months.
- US investors are the most upbeat as confidence in the domestic economy has climbed, the firm’s sentiment survey showed.
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Investors worldwide are holding “elevated levels” of cash in their portfolios but nearly half of them are thinking of putting that money to work in stocks this year, according to a survey by UBS Global Wealth Management published Wednesday.
The firm’s quarterly investors’ sentiment survey showed cash and cash-equivalents such as certificates of deposit formed 22% of portfolios held by individual investors, slipping from 25% since September 2020.
The firm called the weighting “high” and said it is in contrast with improvement in market and economic conditions such as equities rallying to record highs and the vaccination of millions of people against COVID-19. The survey found that 62% of investors hold at least 10% of their assets in cash.
41% of investors told UBS they are considering increasing their holdings in stocks over the next six months, and 64% believe equities are an effective avenue of diversification during economic recovery from the pandemic.
UBS said 12% of survey respondents planned to cut their exposure to stocks and 47% aimed to make no changes to portfolios.
“Investors’ cash holdings are still far higher than our recommended allocations, especially given the current market and economic environment, so it is encouraging that they are looking to invest more in equities,” said Tom Naratil, co-president of UBS Global Wealth Management, in the survey’s statement. “If inflation picks up, the value of cash will be eroded in real terms, and investors will be forced to look to other asset classes to help meet their financial goals.”
The survey found that US investors were the most upbeat worldwide as 70% expressed confidence in their economy, a climb from 52% three months ago. Their optimistic view on stocks accelerated to 71% from 59%, with that gain coming alongside 61% of investors expecting inflation to rise over the next three years, the highest regional reading.
The findings from UBS come at a time when Americans have built up $1.6 trillion in savings during the coronavirus health crisis, according to research from the Federal Reserve Bank of New York. Contributing to the tally is about $5 trillion in fiscal stimulus issued by the Biden and Trump administrations in an effort to mitigate the economic blow from the spread of COVID-19. Economists have largely stepped up their expectations for US economic growth and, accompanying that, their views on inflation levels.
The Federal Reserve has indicated it will tolerate inflation rising above its 2% target to accommodate growth and has indicated it will hold its benchmark rates near zero until at least 2024.
UBS said 41% of respondents said they hold cash as an emergency fund or to protect against a potential market downturn. Meanwhile, investors consider industries that are being transformed by technology as a key theme in the equity market, with 70% citing them as a top opportunity.
Overall, 70% of investors hold an optimistic view on the stock market for the next six months, up from 61% in the previous survey.