HNW investors: Invest in U.S.

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The United States is the only country that a majority of Colorado high-net-worth investors regard as a “good” investment for the upcoming year.

At 60 percent, this is at least 25 percentage points higher than the next region and countries — Western Europe (35 percent), Japan (25 percent) and India (23 percent) — according to a recent poll conducted by Morgan Stanley Wealth Management.

Morgan Stanley Wealth Management’s Investor Pulse Poll is a survey of national and regional HNW investors. Previous surveys in this series were released in April 2013, January 2014, September 2014 and January this year.

A slim majority (51 percent) of Colorado HNW investors currently have international investments, such as international mutual funds or non-U.S. stocks or bonds in their portfolio. However, fewer are likely to either add new money to international investments (30 percent) or move existing money within their portfolio to international investments (25 percent) in the next six months.

Asset allocation: In favor and out-of-favor

HNW investors’ anticipated asset allocation at the beginning of 2016 favors stocks or equities (46 percent), followed by cash (21 percent) and fixed-income investments (20 percent).

Perceived investment potential when HNW investors consider various financial products for 2016:

  • Favored: dividend-bearing stocks (56 percent say “good”), broad stock market and exchange-traded funds (49 percent), actively managed mutual funds (48 percent), mutual or exchange-traded funds (45 percent), and Real Estate Investment Trusts (REITs) (38 percent); and
  • Disfavored: annuities (21 percent say “good”); commodities and precious metals other than gold (22 percent); bonds (22 percent); sector funds (25 percent); and international stocks or mutual funds, gold and municipal bonds in Colorado (26 percent, each).

Perceived investment potential when HNW investors consider various countries/regions for 2016:

  • Favored: United States (60 percent say “good”), Western Europe (35 percent), Japan (25 percent), India (23 percent) and China (20 percent); and
  • Disfavored: Ukraine (1 percent say “good”), Russia (2 percent), the Middle East (6 percent) and other Eastern European countries (7 percent).

Investors expect interest rate hike next year

Two in three (67 percent) expect the Federal Reserve to raise interest rates between now and mid-2016. However, there is no clear consensus on whether it is a good or bad idea to raise rates: 32 percent say good; 32 percent say bad; 22 percent say neither and 14 percent are unsure.

Sixty-one percent of male respondents indicated  they followed the Federal Reserve and its decisions very and somewhat closely, compared to  35 percent of female respondents.

Water shortage may top issue of oil

Most (70 percent) say they know only “a little” about the water shortages in certain regions of the U.S. today. And just over half (54 percent) say they have been affected by these shortages “a little.”

Thinking specifically about HNW investors’ local areas, close to half (47 percent) are at least somewhat concerned about the potential for a water shortage — and even more (66 percent) believe their area is likely to be affected by water shortages in the next 10 years, the release said.

Most (70 percent) feel that water shortages will become more of a problem over the next 10 years, and another 54 percent believe that water has the potential to be a bigger international issue than the demand for oil. Many also predict that water shortages will lead to about the same number of international conflicts (64 percent) or more such conflicts (33 percent).

Nearly nine in 10 say that U.S. water shortages have not, to their knowledge, affected their portfolio. Still, a sizable one in four HNW investors in Colorado has either invested in water-based conservation funds, or plans to consider doing so in the next three years.

When it comes to America’s water supply, a large majority of Colorado HNW investors feel that either the same amount of regulation (47 percent) or greater (28 percent) is needed.

Colorado HNW investors project moderate interest in specific water-related investments, ranging from a high of 50 percent at least somewhat interested in investing in water re-use or treatment, to a relatively low interest of 30 percent in water bond investments.

Marijuana investing? Unlikely

Interest in investing in legalized marijuana is relatively low among Colorado HNW investors. In the next 12 months, seven in 10 are not at all likely to invest; another one in five are not too likely.

When it comes to the energy sector, oil and gas investments prove most popular, with 45 percent currently owning them. Alternative energy investments rank in second place for current ownership (25 percent), though they take the lead in both considering (8 percent) and planning to invest in the next three years (12 percent).

Colorado investors optimistic about local, state economies

Colorado HNW investors are optimistic about the Colorado economy, with an overwhelming majority (92 percent) citing they believe it will same or improve in the next 12 months.

That figure has grown 10 percentage points since April 2013, where only 82 percent of Colorado investors expected Colorado’s economy to be the same or improve. A very large majority (94 percent) of local HNW investors also expect their local economy will be the same or improve. This compares to the national average of just 85 percent.

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