Samuel OskysThe reason? UBS global wealth management surveyed more than 3,400 “high-net-worth individuals” across 13 markets revealing that many are holding onto more cash in anticipation of global turmoil in 2020.
More than half of participants anticipate that there will be a recession next year. The majority of respondents also believed that the continuation of the US-China trade war will impact next year negatively.
Due to these concerns, 60% have increased cash reserves to brace for the hard times ahead increasing reserves to 25%, a few percentages higher than normal.
Sameer Aurora, executive director in UBS Wealth Management’s client strategy office commented:
Given where we sit in the geopolitical uncertainty, people are looking to put cash to work”, adding, “People are looking to diversify their portfolios, which is a natural response to the environment we’re in, and they’re looking for advice as we stand at the doorstep of what might be a watershed year with Brexit and a US election looming. Putting money into cash is a reflection of that.
The move to cash reflects the worry of what 2020 has in store and the vitality of markets and economies. It appears that investors are now more concerned about large global changes rather than natural market cycles.
As the wealthy are holding back on spending areas such as art and property are feeling the effects. A report by the French database Artprice revealed that global auction sales were down 17.4% in the first half of 2019. Chinese buyers, who have played the main role in the market for the last few seasons, have vanished. In July, one of the business’s private galleries, Pace, closed down in Beijing.
Property markets also suffer from luxury properties in prime locations remaining unsold. In Manhattan, it is estimated that 9000 unsold new condo units remain on the market, a supply that could take up to 9 years to sell out. In the Hamptons property faced its worst-selling season since spring 2009, leaving a three year supply of unsold property.
However, Aurora remarks the fact that 25% of wealthy individuals’ assets are held in cash is a reflection of the fact that they are looking for something to do with it.
He comments:
People are still looking to put money to work in high-quality assets, but people are looking to rebalance their portfolios so they are well-positioned for the months ahead of where they see uncertainty. We’re living in uncertain times and looking at factors, like the US-China trade war, that didn’t exist even two or three years ago.
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