Wealthy U.S. investors are holding record cash balances out of fear that the U.S. presidential election will wreak havoc on their retirement accounts, a senior UBS Group AG executive said.
Bob McCann, who chairs the Swiss bank's Americas division, said in an interview this week that clients are confident about the economy but hesitant to invest because the Nov. 8 election seems so unpredictable. Although the U.S. stock market hit a new high this week, many clients would rather sit on the sidelines than risk the kind of losses they faced in 2008, he said.
"Historically, individual investors define risk as, 'How much volatility can I live with in my portfolio?'" McCann told Reuters ahead of a UBS event in Hartford, Connecticut, on Monday evening.
"The definition has changed to, 'How much money can I afford to lose permanently?'"
The event, featuring two former U.S. Senate majority leaders, was intended to calm clients' nerves about the election. Unpredictable and sometimes fiery rhetoric from candidates has given them reason to worry.
A tweet from presumptive Democratic nominee Hillary Clinton in September sent biotech stocks crashing.
Republican candidate Donald Trump has promised to dismantle financial reform laws, force Canada and Mexico to renegotiate the North American Free Trade Agreement, and slap steep tariffs on Chinese and Mexican imports.
A UBS survey of 2,200 high net worth investors found that 84 percent of them think the election will have a significant impact on their financial health, McCann said, citing a report due to be released later in July. Individual investors have consistently held an average of 20 percent of their portfolio in cash over the past five years, according to UBS data.
At the event, McCann interviewed Trent Lott, a Republican from Mississippi, and George Mitchell, a Democrat from Maine, about candidates' policies and how they might impact the economy.
Neither Lott nor Mitchell would say which candidate would be a better economic steward, noting that the United States remains a superpower despite challenges ranging from the Sept. 11 attacks to presidential impeachment.