A majority of ultra-wealthy families are stockpiling cash to prepare for a recession, which they believe could hit the U.S. by 2020.
Continue Reading Below
That’s according to the UBS Global Family Office Report, which found that 55 percent of wealthy families — worth an average of $1.2 billion — think the U.S. will slide into a recession within one year. About 45 percent of respondents said they’re boosting their cash reserves in case of an impending economic slowdown, while 45 percent are shifting their investment strategies to mitigate risk.
“We are very cautious,” a survey respondent, who’s managing a multi-family office in North America, said. “Even now with the market we don’t feel very comfortable.”
Concerns escalated when the spread between two-year and 10-year Treasury yields inverted in mid-August — an occurrence that’s historically preceded recessions — but uncertainties surrounding Britain’s tumultuous exit from the European Union and the year-long trade war between the U.S. and China also rattled some families.
“Who knows what will happen with Brexit, what will happen in the EU, and what will happen between the U.S. and China,” another respondent, the CEO of a single-family office in Europe, said. “There are so many open questions, and this could have a dramatic impact on the market. In general, we think we have reached our peak.”
In order to shield themselves from possible economic calamity, some survey respondents said they were avoiding short-term market volatility by focusing on the long-term outlook of 10 to 15 years.
The report shed light on private wealth management advisory firms that serve ultra-wealthy investors. Taxing the rich has become an increasingly popular idea among Democratic presidential candidates.
On Tuesday, Vermont Sen. Bernie Sanders unveiled a plan to tax the wealth of the richest Americans, including one that he said would halve the wealth of billionaires in the U.S. Likewise, Sanders’ fellow Democratic presidential candidate Sen. Elizabeth Warren rolled out a wealth tax earlier in the year, including a 2 percent tax on individuals worth more than $50 million and a 3 percent tax on those with more than $1 billion.