Investors emotionally reconnect with the concept of portfolio diversification while trying to cope with the high inflation caused by the pandemic macroeconomic recovery.
About 50% of investors surveyed in a new UBS survey found that they will adjust their portfolios over fears of accelerated inflation over the next 12 months. UBS’s quarterly Investor Sentiment survey found that 35% of investors plan to add stocks, 33% plan to buy precious metals and 32% are excited about sustainable investments in the future.
On the other hand, 32% of investors want to add real estate to their portfolios to reduce the impact of inflation.
“While we expect the recent rise in inflation to moderate, the inflation outlook remains uncertain and therefore building inflation protection into portfolios is an appropriate step for investors to take now. This includes investment in commodities, private market infrastructure and stocks with pricing power, as these areas tend to outperform in an inflationary environment and will help maintain purchasing power over the long term,” said UBS Americas and co-president of UBS. Wealth Management Tom Naratil.
One doesn’t have to search too hard to see the inflation weighing on the minds of investors.
Consumer prices rose 5.4% in June from a year earlier, the largest monthly increase since August 2008, according to the latest Consumer Price Index (CPI) report. Profits were made in everything from food to women’s clothing to used cars. Core prices rose 4.5%, the largest increase going all the way back to September 1991.
Elsewhere, the national average price of gasoline has risen more than $1 since the beginning of the year. Restaurant hourly wages continue to climb to $15 and more as businesses scramble to get employees to meet an influx of demand.
Even avocado prices are inflationary, Chipotle CFO Jack Hartung told Yahoo Finance Live.
To be sure, investors have felt the inflationary effects firsthand – hence the looming portfolio adjustments.
About 58% of investors surveyed by UBS said inflation has affected them personally in the past six months. Overall, 61% believed inflation would “somewhat” affect their portfolios if they didn’t take action.
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