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UK High Net Worth:

Optimism for the global economy returns

The latest data from MillionaireVue, our omnibus of high-net-worth individuals, reveals UK millionaires’ confidence has made a welcome return to the same highs as the start of 2023.

David Barks Senior Director 15/05/2024

The latest data from MillionaireVue, our omnibus of high-net-worth individuals, reveals UK millionaires’ confidence has made a welcome return to the same highs as the start of 2023.

The start of the Ukraine-Russia conflict in early 2022 shook HNW confidence due to its impact on businesses, trade, and therefore stock markets that affected their investments. Plus, in Q3 2023, persistent high inflation, higher interest rates, disappointing equity markets, and discounting in the property market meant that HNWs were becoming jaded about the economy.

However, in Q4 the markets have made gains once again, and confidence has gradually increased among HNWs. For example, the S&P500 climbed 10% rescuing a disappointing year and giving HNWs some festive cheer. And since then, markets have been steady through Q1 leading to settled perceptions of the economy.

Confidence in personal savings and investments continued to stay high but flat in Q4. Savings rates more widely reflecting the higher borrowing costs meant millionaires have security for their capital and inflation matching returns. Now in Q1, better than expected portfolio returns have also boosted perceptions of their personal financial situations. The advent of new investment opportunities, particularly in technology and sustainable ventures, has opened new avenues for growth and profit. Lastly, the expansion of digital platforms has facilitated greater access to market information, empowering millionaires with the knowledge to make more informed decisions and more footloose in their dealings with investment providers.

Younger millionaire’s economic perceptions are very volatile
In Q4 2023, the growth in optimism of the global economy was driven by under 35s – almost twice as many were optimistic as they were in Q3 (33% to 62%). In Q1 2024, this has completely flipped with now only 43% optimistic. The swings and roundabouts of the investment world and poorer returns over the previous two years has made them lack enthusiasm. The quality of investment communication, particularly digitally, is something we often see demanded by younger millionaires too. And this is something that not all wealth managers provide well enough given the digital experiences they have outside of finance.

Those still working remain much more likely to be optimistic than those retired; 56% cf. 33%. But this hides significant growth in optimism for retired millionaires from a low of 16% in Q4. Retired millionaires are often in much less volatile portfolios and so a return to growth in markets has less impact, however, it’s still widely welcomed in annual reviews.

 

There are concerns on the horizon
Concerns around inflation remain for almost 50% of UK millionaires, particularly those working and earning more than £200k a year. The other big concern is equity market volatility, and this is more felt by retired millionaires who rely more on the income from their portfolios to maintain their lifestyles.

This initial rise in confidence is therefore also juxtaposed against a backdrop of political uncertainty due to upcoming elections in major economies. Such events introduce a level of unpredictability that can affect market perceptions and investment climates.

So what…
In the short term, the increased confidence among millionaires translates to a greater willingness to invest in high-value, personalised offerings. Marketeers at wealth managers should focus on creating bespoke products and services that cater to the unique preferences of this demographic.

For luxury brands, this could lead to an uptick in sales across various luxury sectors, including high-end fashion, luxury automotive, fine jewellery, and premium experiences. However, given the political uncertainties surrounding upcoming elections, there might be a trend towards viewing luxury goods not just as items of personal enjoyment but also as alternative investments. Fine art, vintage watches, and rare wines have historically held or increased their value over time. This could lead to a surge in purchases of luxury items perceived to have long-term value, supporting the luxury market’s resilience even in times of broader economic or political instability.

In the medium term, investment communications emphasising stability and long-term value amidst political uncertainties may be needed through to the end of 2024. Highlighting the resilience of investments in turbulent times can appeal to their desire for security. Organizing high-profile events or webinars that focus on the implications of election outcomes on investments can also be particularly engaging for this demographic. Providing a platform for discussion with experts can help manage perceptions and alleviate concerns.

To find out more about the work our wealth and luxury team undertakes, or to speak to one of our wealth specialists, please click here

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