Nearly two thirds (59 per cent) of European ultra-high-net-worth clients remain optimistic about stock market valuations, believing that current conditions indicate the market still has room to grow, according to JP Morgan Private Bank’s Private Client Survey.
However, many remain cautious with over two-fifths (41 per cent) believing current valuations indicate the stock market is already in bubble territory and that a downturn is coming soon.
Throughout 2018, trade tensions between the US and China have continued to escalate with many clients (40 per cent) believing the potential global trade war to be the greatest risk for emerging markets. Other major headwind concerns amongst investors include US dollar strength (25 per cent), China’s economic slowdown (18 per cent) and US Federal Reserve tightening monetary policy (17 per cent).
Whilst many ultra-high net worth clients have become less confident about the outlook for global stock markets since JP Morgan Private Bank’s Spring Private Client Survey, many still see late-cycle opportunities. Almost two-fifths (38 per cent) of clients continue to believe equities will be the best-performing asset class over the next 12 months, followed by alternatives (34 per cent) and commodities (15 per cent). By sector, over half (58 per cent) see most opportunity in the healthcare sector with many predicting this traditionally defensive sector will outperform as the business cycle matures and demographic trends, such as growing and ageing populations, persist.
“From trade tariffs and higher interest rates to populist politics, there’s been no shortage of uncertainty in 2018,” says Oliver Gregson, Head of the UK & Ireland markets for the JP Morgan Private Bank. “Escalating trade tensions remain the biggest risk to our view and of most concern amongst our clients with such a descent into a full-blown trade war likely to be negative for stocks worldwide.”
“We believe we are closer to the end of the cycle than the beginning,” says Gregson. “However, late-cycle does not mean end of the cycle. As market conditions are likely to become more volatile long-term investors should stay patient and maintain diversification in their portfolios.”