More than Half of Wealthy Investors See a Sizable Market Drop in 2020

With markets at all-time highs a majority of wealthy investors are bracing for a vicious pullback in 2020, according to a UBS survey.

With geopolitical risks, many of them have increased their cash holdings to 25%, the survey showed.  “Investors see reasons to be cautious in the new year,” said UBS Global Wealth Management’s client strategy office, as quoted by CNBC. “Two in three global investors believe markets now are driven more by geopolitical events than business fundamentals such as profitability, revenue and growth potential.”

Geopolitical concerns include the trade war and the 2020 presidential election.

The U.S. China Trade War

It’ll be interesting to see what happens next with the trade war.

At the moment, President Trump appears unwilling to remove tariffs on Chinese imports.  In fact, the President said that while trade talks were moving along, “very nicely,” as highlighted by Reuters, the U.S. would only make the deal if it was good for America.  

“The trade talks with China are moving along, I think, very nicely and if we make the deal that we want it will be a great deal and if it’s not a great deal, I won’t make it,” he said. “I’d like to make a deal, but it’s got to be the right deal.”

The 2020 U.S. Election

Prior to most elections, volatility and market downside is a given.

Prior to the 2000 election (Bush v. Gore), volatility, as measured by the VIX jumped from 16.5 to 31.7.  In the 2004 election (Bush v. Kerry), the VIX jumped from 13 to 17. In 2008 (Obama v. McCain), the VIX soared from 20 to a high of 90.

In 2012 (Obama v. Romney), the VIX jumped from 13.2 to 20.  

And, prior to the 2016 election (Trump v. Clinton), the VIX jumped from 12 to 22.

In short, those wealthy investors do have reason for concern.