Earlier this month, wealthy investors and business owners had a positive long-term outlook on the U.S. economy. They still do, but they also believe the novel coronavirus will be even worse for the economy in the short-term than they anticipated, as the number of new cases in the U.S. has spiked.
Like many others, high-net-worth investors—those with at least $1 million in investable assets—have been advised to stay home, only travel when necessary, and have been impacted by businesses ordered to halt, as the country attempts to slow the spread of the outbreak. Still, they view the economic impact of the virus as relatively temporary.
The majority (77%) of high-net-worth investors expressed long-term optimism on the economy in surveys throughout March by UBS, up from 66% in January of this year.
But attitudes toward the short-term have changed significantly throughout the first quarter. Daily new confirmed cases of the coronavirus in the U.S. began quickly rising, especially over the last two weeks, and the optimism the rich had for the near economic future is even weaker.
As of Monday afternoon, at least 144,732 people had become sick with the coronavirus and more than 2,300 had died in the U.S., according to a New York Times database tracking global confirmed cases.
In January, 68% of high-net-worth investors were “optimistic” about the U.S. economy, but that number fell to 39% in early March, when hundreds of new cases were being confirmed each day. Now, little more than a week later, thousands of new cases are reported daily and only 31% of the investors still have an optimistic view on the economy in the coming months.
“Fewer investors think COVID-19 will subside by the end of June and more think the issue will persist at least until the end of 2020, although just under half think it will subside by the middle of the year,” according to the UBS report.
In addition to the virus, 60% of high-net-worth investors are also worried about the political environment, up 2% from early March and 5% since January—perhaps a reflection of the coming presidential election and what impact the virus could have on voting in the primaries and the general election in the fall.
However, the shift in sentiment isn’t necessarily changing how the high-net-worth invest. Investor concern about market volatility rose “sharply” last week to 59%, up from 46% in early March, UBS said. But about six in 10 investors plan to keep their portfolios the same and roughly 30% plan to invest more. Only 11% said they plan to invest less. “More investors are looking for buying opportunities rather than reducing their investments,” according to the UBS report.
Advisors should pay attention to how high-net-worth investors feel about the economy and what they are doing with their portfolios, they might find themselves catering to them more in the future. Only a handful of big wealth managers will achieve the necessary scale to fully serve all types of customers. All the others will have to remain focused on the wealthiest investors, according to McKinsey & Company.
Assuming the outbreak subsides, the number of business owners planning to hire still outweighs the number planning to downsize over the next 12 months, according to UBS.
