We are Living in the Most Unpredictable Period in History
A major study of 2,800 (hard-to-reach) high-net-worth individuals in seven different markets has provided a detailed view of the attitudes, fears and hopes of wealthy people around the world.
UBS Wealth Management recently asked 2,842 high-net-worth individuals globally for their views on political and economic uncertainty, after a rollercoaster year that has included the election of President Trump, the Brexit vote in the UK, and rising tensions over North Korea.
Feelings were mixed but overall feedback remains optimistic:
- 82% of millionaires say we are living in the most unpredictable period in history. Financial and economic risks are top concerns in this situation (eg. Brexit is the top domestic threat in the UK). Also, more than half are suffering from information overload as they make decisions to navigate this uncertainty.
- It can be hard to focus on facts and the long-term. Nearly three quarters feel distracted by short-term risks and unforeseen events keep getting in the way of their financial plans. Meanwhile, emotions, not facts are increasingly the driving force behind voter choice and public opinion.
- Nearly half think new technologies like Artificial Intelligence can make the world more predictable but views on social media are clear – remarkably few believe it helps make the world more predictable.
Investors remain confident about the future with 57% still optimistic about reaching their long- term financial goals.
The following three tactics are recommended to help deal with unpredictability:
- Focus on the long term – Avoid responding to short-term events or distractions. Cutting through this noise has never mattered more, because there has never been so much of it.
- Maintain a diversified portfolio – Exposure to a broad range of assets and geographies is essential. It helps to avoid the risks of domestic biases. Adding alternative investments can provide another source of protection against global and regional uncertainty while offering attractive yield opportunities in the mid to longer term.
- Be wary of overestimating the safety of cash – Cash may always be attractive, especially in an unpredictable world. But inflation erodes its value, meaning that cash assets can damage your financial health in the long term.
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