Inflation continues to worry investors and luxury buyers in the UK; it’s a challenging environment for wealth managers to manage expectations.
The latest data from MillionaireVue, our omnibus of high-net-worth individuals, reveals UK millionaires’ confidence continues to steadily increase despite the current economic climate, reaching its highest level since 2020 – a further, though slight, improvement on last quarter.
The wealthy’s confidence in the global economy has grown for the fifth consecutive quarter. However, confidence in this area remains below the Q2 2021 peak, due to continued reservations surrounding rising interest rates, the war in Ukraine, and uncertainty in the property market.
Confidence in personal savings and investments is however flatlining. With HNWs now chasing savings rates and challenging wealth managers to continue to at least preserve the value of their capital against inflation, confidence in meeting their financial goals has stuttered.
Inflation, inflation, inflation
Concerns about inflation are population-wide. Whatever the age or wealth profile of the millionaire in our survey, around three in five see it as a big investment risk. But it’s those relying on their investments for their retirement income who are most likely to be downbeat about their situation with one in five pessimistic about their savings and investments.
The most pessimistic also seem to be execution-only investors suggesting that wealth managers are doing a good job at calming the fears of their most valued clients.
Across the pond
While UK millionaires’ confidence in the global economy and personal savings and investments continue to grow, millionaires in the US remain more pessimistic, particularly when it comes to confidence in the global economy, where the UK index is 19, 17.5 points above the US (which is sitting at 1.5).
US millionaires are much more circumspect about equity markets, with one in three citing it as a current investment risk, compared to one in four UK HNW.
Drinks and cars
Despite the inflationary concerns, the overall propensity to spend on luxury items also remains stable among the UK millionaire population.
Where propensity to buy luxury brands is on the rise within wine & spirits and cars. These two sectors have seen a 7% and 6% rise in propensity since Q3 2022 respectively. This is driven by the steady rise of HNW confidence over this time and a relaxation of attitudes towards spending of disposable income.
Will it remain this way?
With inflation remaining stubbornly high, but starting to show signs of slowing, HNWs confidence may well increase further.
However, those amongst this cohort (who are still working and running their businesses) may yet find their borrowing needs severally restricted by the higher interest rates. Private Banks’ lending teams and the prime property sector may well experience more limited demand. And the UK’s already low business investment rates are likely to come under further pressure.
What does this mean for you?
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