Gold, despite experiencing a decline in value in recent days, has long been viewed as a safe haven asset, even before the recent market fluctuations. While many hedge funds and institutions have been selling off assets, wealthy individual investors have largely remained calm, with some even taking advantage of the lower prices to engage in tax-loss harvesting and estate planning.
According to interviews with top executives in wealth management, high-net-worth investors have shown a decreased urge to sell off their investments compared to previous market crashes. Instead, many have used the opportunity to adjust their portfolios strategically. Wealthy investors have been managing their emotions and investment decisions with the help of advisors, such as John Mathews from UBS, who emphasized the importance of staying level-headed and avoiding impulsive actions based on emotions.
Mathews noted that many UBS clients had already begun reducing their exposure to stocks and increasing cash reserves earlier in the year, which helped cushion the impact of the recent market turbulence. With a significant amount of cash on hand, wealthy clients have been able to take advantage of buying opportunities that emerged during the market downturn.
While some investors have turned to private equity for less volatile investment options, others have expressed interest in gold as a hedge against market uncertainty. Pamela Lucina from Northern Trust highlighted the dilemma faced by investors during turbulent times, comparing it to deciding whether to buy a property that has experienced a price drop with the uncertainty of further decreases.
Overall, wealthy investors are taking a cautious approach, waiting for more clarity on market conditions before making significant investment decisions. Despite the market roller coaster, many have remained patient and strategic in their investment choices, guided by advisors and wealth management professionals.
Lucina advises wealthy clients to follow her “three Ps” approach: don’t panic, don’t predict, and engage in planning. She emphasized the importance of having portfolio reserves in cash and other liquid assets to avoid selling at a loss during market downturns. These reserves can provide necessary funds for daily expenses. Lucina also recommends planning for volatility and utilizing risk-off assets to maintain a desired lifestyle.
While some clients refrained from major investments, others who recently sold their businesses started putting money into equities. Northern Trust’s main advice to clients has been to focus on estate and tax planning opportunities amid the market decline. Strategies such as GRATs, Roth conversions, and tax-loss harvesting are being considered to optimize wealth transfer and tax savings.
Matthew Fleissig from Pathstone noted a shift in client sentiment from fear to a proactive approach of considering investment opportunities. Wealthy clients, particularly family office clients, are gradually investing in the market and showing interest in structured products for downside protection and upside potential. However, caution is advised regarding private credit investments due to potential risks.
Dmitriy Katsnelson of Wealthspire mentioned that wealthy investors tend to hold more cash for tax payments at the end of the first quarter, which is now serving as a buffer against market losses. Investors are contemplating whether it is the right time to increase their investment activity. While most investors are maintaining their portfolios, smaller investors and those nearing retirement are experiencing more volatility compared to ultra-wealthy clients, who have diversified investments in alternatives that are not valued daily.
“They are directly affected, and we are ready to lend an ear.”For more information from CNBC: The massive ‘short squeeze’ that led to record gains in stocks on Wednesday, freight rates soar as trade shifts from being ‘super cautious’ to ‘ships are filling up,’ Check your eligibility for the $1,400 IRS stimulus check before the deadline.
