The war in Ukraine is making global inflation an even bigger concern for investors than it was before the conflict, according to a new quarterly Investor Sentiment survey released by UBS.
The survey polled over 2,500 investors and 1,000 business owners across 14 markets worldwide.
According to half of investors polled, market volatility is higher than usual, and a majority of them (92%) said they expected the war to increase inflation. More than half of respondents also believed inflation would last longer than 12 months. Two-thirds of investors (66%) also anticipated higher energy prices; global instability (64%); and increased cyber attacks (60%).
Despite a pessimistic outlook, investors remained undeterred and said they were not adjusting their portfolios yet, but were prepared to do so should the market decline further. Many said they were more likely to consider buying gold, domestic stocks and oil, while technology and energy remained the most attractive sectors in the current market environment.
Business owners were just as concerned with geopolitical instability amid rising material costs, tax increases, heightened regulations and supply chain issues impacting their bottom line, UBS found. As a result, their outlook over the next 12 months declined 11%. Rather than focusing on hiring and investment plans, business owners said they would increase their employee benefits and IT spending, and upgrade talent.
“The impact of the war in Ukraine and rising inflation have forced business owners to again adapt to an unprecedented and unpredictable situation, after managing the effects of the pandemic on their business,” Tom Naratil, president of UBS Americas, and co-president of UBS Global Wealth Management, said in a news release. “In a tight labor market, business owners are working with their financial advisors on employee wellness offerings such as UBS’s Workplace Wealth Solutions, to bring greater value to their employees.”
UBS found that U.S. short-term investor optimism in the nation’s economy and stock market increased since last quarter, both rising four percentage points to 58%. However, plans to invest more in the next six months were down slightly by three percentage points to 33%. Geopolotical risk joined politics as a top concern, UBS said, followed by inflation, with six out of 10 investors expressing concern about the war in Ukraine and its impact on their portfolio.
In Latin America, short-term optimism rose only two percentage points to 60%, with 61% of Latin American investors saying they were optimistic about their outlook for stocks in their region. More than half of those surveyed (56%) said they planned to invest more in the next six months.
Throughout Europe, just over two-thirds of investors surveyed said they continued to be optimistic about their economy in the short term. Despite that view, the outlook among investors took a downturn by four points to 63%. Nearly half of European respondents said they planned to invest more in the coming six months (46%), a decrease of three percentage points from the last UBS quarterly survey.
Asian Pacific investors remained optimistic about the six-month outlook for stocks in their region, as well as the economy overall, despite a decrease of two percentage points among those who said they planned to invest more in the next six months. The ongoing pandemic remained a concern for many investors in China (45%), but decreased regionally from 51% last quarter to 47% this quarter.