High-net-worth individuals expect sell-off in equities

High-net-worth individuals are preparing for a global sell-off in equities, according to a poll by UBS Wealth Management. The Swiss bank conducted a survey of more than 3,400 respondents, which showed that there are still concerns about geopolitical risks. That is why they prefer cash and short-term government bonds.

The trade conflict between the United States and China is at the top of the list of concerns, followed by the US presidential election in 2020. The majority of respondents expect a sharp correction in the stock market before the end of next year.

According to Paula Polito of the Swiss UBS, wealthy clients are making more care on geopolitical developments. They expect these developments to have a major impact on the value of their investments. That is why they hold about 25% in liquid instruments such as cash and short-term government bonds.

"The rapidly changing geopolitical environment is the biggest concern of investors worldwide. They see that everything is globally connected and fear that these risks will have more impact on their investment portfolios than traditional fundamentals. That's a clear change from the past."

More volatility

Nearly four in five respondents expect more volatility in financial markets next year and just over half think there will be a significant correction before the end of 2020. That is why sixty percent are considering further expanding their position in cash and short-term government bonds. Nearly two-thirds of those surveyed — who can invest at least $1 million — are considering more diversification within their investment portfolio.

In recent weeks, stock prices have risen to their highest level in years. In the United States, the main indices are at record highs, while the AEX reached its highest level since 2001. Investors are leaving safe havens, as the prices of government bonds and precious metals fell. The Gold price In the past two months, the silver price dropped from more than €45,000 to €42,500 per kilogram, while the silver price fell from €570 to €490 per kilogram.

Gold as diversification

This price drop makes it more attractive to invest in precious metals. As we wrote earlier, gold is a Effective tool to diversify an investment portfolio. The precious metal has little correlation with other investments and usually performs well on days when the stock market goes down.