Swiss bank UBS has released its latest quarterly Investor Sentiment survey, covering high net worth investors across the US, Europe, Latin America and Asia-Pacific, on their sentiment toward some of the world’s most important issues and where they see investment opportunities.

This quarter, optimism among high net worth investors fell to early-pandemic levels on continuing concerns about the economic and market impact of inflation and the war in Ukraine, an Investor Sentiment survey from UBS shows.

The survey of over 2,800 investors and 1,100 business owners across 14 markets found that investors are focused on their retirement savings, with some holding off on making big purchases.

With investor optimism waning, nearly three out of four investors are now worried about making bad investment decisions in the current environment and are holding on to cash, the survey reveals.

Despite this, they see potential investment opportunities if markets decline further, and are highly interested in energy security, smart mobility, and automation/robotics as long-term investment themes. 

"Investors across the globe are concerned about the combination of higher inflation, the war in Ukraine and the potential for a recession," said Iqbal Khan, president of UBS Europe, Middle East, and Africa and co-president of UBS Global Wealth Management. 

“In challenging times like this, it’s important that investors continue to seek expert guidance and perspectives to understand the environment and potential opportunities to support their liquidity, longevity and legacy needs," he added.

In contrast, business owner optimism has rebounded after the largest drop in two years; most business owners plan to continue hiring workers and investing in their businesses over the next 12 months, the survey shows. Nearly half of business owners expect to raise prices in the next six months, responding to rising materials costs and concerns over wage inflation. 

“Business owners’ increased optimism and steady focus on hiring and investing in their businesses is an encouraging sign given the current market environment, as they are a key driver of the global economy,” said Tom Naratil, president of UBS Americas, and co-president of UBS Global Wealth Management.

“Thoughtful wealth management advice and solutions across business planning, portfolio diversification and exit planning will be critical for them as they navigate the market," he added.

Nevertheless, the May results varied across the different regions, with optimism higher in Asia-Pacific, as detailed below.

US
In the US, short-term investor optimism on the economy and stock market plunged to 39 per cent and 37 per cent, respectively, from 58 per cent in May, the survey shows. If markets decline a further 10 per cent, younger investors are much more likely to increase their investment allocation to the markets than older investors. 

Looking ahead to the mid-term elections, the most important concerns for US high net worth investors are the economy (85 per cent), followed by healthcare (74 per cent), taxes (72 per cent) and social security (71 per cent), UBS said in a statement this week. 

Latin America
Short-term optimism among Latin American investors held up better than in the US, the survey shows, with 53 per cent feeling optimistic about the economy and the stock market in their region versus 60 per cent in the prior period. Their optimism is driven by a sense of a return to normalcy, continuing strong consumer demand, as well as potential opportunities to capitalize on dips in the market cycle.

Europe
Across Europe, optimism about the stock market and the economy among high net worth investors is down 10 and 15 percentage points respectively, from May levels to 50 per cent, the survey reveals. Those Europeans who are optimistic cite reasons including the strength in company earnings, employment, and consumer demand.

Meanwhile, UK investors are feeling the impact of inflation, with 40 per cent holding off on big purchases in the short term and 38 per cent highly concerned about the value of what they will pass on to future generations.  Some UK investors nevertheless seek opportunities in the market decline, with 34 per cent saying they would increase investment if it drops 10 per cent and 54 per cent would keep investment levels the same, the survey reveals.

Asia-Pacific
In Asia-Pacific, optimism is holding steady and remains the highest across all regions with six in 10 investors feeling confident in the stock market and their economy, the survey adds. Investors in the region are interested in longer-term investment themes including energy security and smart mobility.