0742 GMT January 25, 2020
A UBS report found wealthy investors around the world are holding a relatively high level of cash in anticipation of global turmoil in 2020. That report added to a growing body of evidence that suggests the wealthy see trouble on the horizon, news.yahoo.com wrote.
UBS’ global wealth management surveyed more than 3,400 ‘high-net worth’ individuals split across 13 markets to take the temperature of their overall economic sentiments.
More than half predicted recession next year, while nearly all respondents felt the US-China trade war will have major implications for the year ahead.
Sixty percent said they were preparing for a recession next year by increasing their cash reserves to 25 percent of their total, a couple of percentage points higher than normal.
“Given where we sit in the geopolitical uncertainty, people are looking to put cash to work,” said Sameer Aurora, executive director in UBS Wealth Management’s client strategy office.
Nearly four-fifths of respondents say volatility will probably increase, and 55 percent think there will be a significant market sell-off before the end of 2020. Sixty percent are considering increasing their cash levels further.
“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,” said Aurora.
The move to cash is another signal of a pervasive anxiety about the direction of the global economy at the end of 2019.
“The rapidly changing geopolitical environment is the biggest concern for investors around the world,” said UBS’s Paula Polito, who noted that investors are more concerned about significant global changes than they are about natural economic cycles.
This move to cash comes after the billionaire Warren Buffett’s Berkshire Hathaway investment conglomerate indicated a record $128 billion in cash, up more than $100 billion since 2009, when it was reportedly holding about $23 billion in cash.
While that could signal that the ‘Oracle of Omaha’ can’t find anywhere to invest or is saving up for a big purchase, Berkshire recently noted that “prices are sky-high for businesses possessing decent long-term prospects”.
But there are other signs that the wealthy are keeping cash under their well-feathered mattresses rather than splashing out on something fittingly luxurious, artistic or expansive.
Last week’s biannual art sales in New York were notably lacking in big-ticket items with no painting or sculpture estimated to sell for more than $45 million. By contrast, the spring sales in May raised $2 billion in purchases, including a $91 million Jeff Koons stainless steel Rabbit sculpture.
A report by the French database Artprice that global auction sales were down 17.4 percent in the first half of 2019. Chinese shoppers, which kept the marked bubbling for the last few seasons, have vanished. In July, one of the business’s heavy-hitting private galleries, Pace, closed up shop in Beijing.