Market view

Investors expect prolonged inflation

While investors say they are concerned about the war, they are not yet sheltering their portfolios. Photo: Shutterstock

While investors say they are concerned about the war, they are not yet sheltering their portfolios. Photo: Shutterstock

According to the Swiss bank UBS, while the Ukrainian crisis and inflation are of concern to investors, they have not yet adjusted their portfolios. Gold, domestic equities and oil are positioned as possible safe havens.

The quarterly UBS Investor Sentiment Survey states that investors are concerned about the war, but are staying the course with their portfolios. Staying in their region's economy and stock market, many expect prolonged and increased inflation. 92% of 2,500 investors and 1,000 business leaders surveyed in 14 markets around the world expect the war to increase inflation. More than half believe inflation will last longer than 12 months and that market volatility is higher than usual.

66% of investors surveyed expect a negative economic impact from the war, with 66% expecting higher energy prices, 64% expecting greater global instability and 60% expecting an increase in cyber attacks.

Gold, domestic stocks and oil

However, these concerns have not yet led to major adjustments in portfolios. "The long-term economic implications of the war in Ukraine are difficult to assess, but most investors remain optimistic about their outlook for the stock market and are confident in their well-diversified investment portfolios," says Iqbal Khan, president of UBS Europe, Middle East and Africa, and co-chairman of UBS Global Wealth Management. But if markets continue to fall, investors would favour gold, domestic equities and oil. "Technology and energy remain the most attractive sectors in the current market environment," says UBS.

Investors still optimistic

In Europe, two-thirds of investors surveyed remain optimistic about their economy in the short term. However, optimism about their outlook for equities in their region has fallen by four percentage points since the last survey, to 63%. 46% of European investors plan to invest more in the next six months, down three percentage points.

In the US, short-term investor optimism about the US economy and stock market has increased since last quarter, both rising four percentage points to 58%. However, intentions to invest more over the next six months are down slightly by three percentage points to 33%. Geopolitical risk joins politics at the top of the list of concerns, followed by inflation, with six out of 10 investors concerned about the war in Ukraine and its impact on their portfolios.

In Asia, investors remain optimistic about the six-month outlook for their region's equities, as well as for the economy in general. But there has been a slight decline in the number of people planning to invest more over the next six months. Covid remains a concern for many in China (45%), but has fallen in the broader APAC region (47% this quarter vs. 51% last quarter).

This story was first published in French on Paperjam. It has been translated and edited for Delano.