Investors are still keeping their cash levels high — but here’s what’s drawing them to stocks, UBS says

Investors have kept their cash stacks high even after the markets and economy have strengthened in recent months as many are looking for or waiting for the right opportunity to buy stocks, according to a survey by UBS Group.

According to UBS’s quarterly investor sentiment survey, cash accounts for 22% of individual investor portfolios worldwide, down just three percentage points since September. But 41% of investors are considering increasing theirs Exposure to stocks In the next six months, with an interest in transformative technology, the sectors are facing good economic expansion and sustainable investment.

“Clients want to get involved,” said Mike Ryan, vice chairman of the department at UBS Global Wealth Management, in a telephone interview. “People are certainly getting more optimistic now” after being “whipped” by the uncertainty of the pandemic and the strong upswing in the market following massive government intervention.

From March 30th to April 18th, UBS surveyed 2,850 investors worldwide with investable assets of $ 1 million or more. The survey included investors who are not UBS clients
UBS, -1.04%,
According to a spokesman for the Swiss bank.

Investor confidence in the US has grown faster than any other region in relation to the economy. The UBS survey found US investors in the world to be the most optimistic. The introduction of the COVID-19 vaccine is contributing to positive investor sentiment, according to Ryan.

Also read: Stocks are at all-time highs and the US economy is booming. Why is everyone so freaked out?

The survey found that 70 percent of US investors are optimistic about their local economy, up from 52 percent three months ago.

“The vaccine was a game changer,” said Ryan. “It was a confidence boost.”

Seventy-one percent of US investors were optimistic about the stock market, up from 59 percent three months ago. The US stock market rose to record levels this year with the S&P 500
SPX, -0.02%
and Nasdaq Composite
COMP, -0.34%
hit new highs this week in the middle of the winning season.

While 47% of investors worldwide plan to keep their portfolios unchanged over the next six months, those considering adding stocks cited technology change, diversification of the recovery and sustainable investing as driving themes, according to UBS.

Ryan explained that investors are looking beyond the current business cycle to transformative technologies such as health technology, fintech or the application of 5G, while at the same time looking for “ESG-friendly investments” that take environmental, social and governance criteria into account.

They also focus on diversifying into areas that initially lagged behind during the pandemic – such as: B. Consumer Discretionary, Energy, Industrials and Financial Services – but can “expand now and extend the rally,” said Ryan.

However, with a consolidating economy it comes Inflation concernsIn particular, with the “strong” mix of fiscal stimulus and accommodative monetary policy of the Federal Reserve, he added.

UBS found that 61% of US investors expect inflation to rise over the next three years. This is the highest finding of any region. Globally, about half of the investors surveyed are “very concerned” that too much inflation will affect their cash holdings, with 26% “somewhat concerned”.

Too high inflation would mean that they would run out of cash, according to UBS. Forty-one percent of investors would increase their holdings in such a scenario, while 31 percent said UBS would add to their real estate positions.

“One of the things I think you are right to realize is that stocks have historically been a better long-term hedge against inflation,” said Ryan. While every investor will have a different situation, UBS believes a cash allocation of around 5% is more typical over the long term, he said.

According to a UBS survey, the most important reasons for investors to keep the cash level high around the world are “waiting for the right investment”, the desire for an emergency fund and protection against a downturn. Some investors are looking for “clearer signs” that another coronavirus outbreak will be avoided and that economic expansion will be “permanent” even if government policies weaken, Ryan said.

“They may well be waiting for a little break or correction,” he added. “Some customers are looking for opportunities for a market decline.”

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