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CTBC Bank Report Finds Affluent Americans in Coastal Markets Cautiously Optimistic on Investing and Economy
[November 09, 2017]

CTBC Bank Report Finds Affluent Americans in Coastal Markets Cautiously Optimistic on Investing and Economy


Despite nervousness about many uncertainties, more than half of wealthy Americans (56%) residing in coastal markets are optimistic that the U.S. national economy will move in the right direction over the next 12 months, while 40% are more confident about the economy than they were a year ago, according to the CTBC Bank Survey: Managing Risk released today by CTBC Bank USA.

The CTBC Bank report examines financial and investing sentiment connected to the economy, equity markets, real estate, commodities, interest rates, national policy, geopolitical issues, technology disruption and whom they trust with investment decisions in uncertain times.

The survey includes responses from 508 high-net worth individuals with $1 million or more in investable assets residing in California, New York and New Jersey, with no direct connection to the bank. The CTBC report also includes insight on the survey findings from a panel of experts.

"While many wealth portfolios soar among the affluent, never in our lifetimes have we witnessed such uncertain times, causing anxiety to grow about managing the multitude of risks," said Noor Menai, President & CEO of CTBC Bank USA. "Ultimately smart investors will go with data, including where ratios are stretched or bubbles exist, all while looking at where there are opportunities to invest."

"People are self-consciously extremely driven in their outlook by the recent past and, over the past several months, markets have repeatedly outperformed expectations and weathered adverse events," explains Max Wolff, Chief Economist at Disruptive Technology Advisors and a faculty member at The New School, noting that economic expectations are the chief indicator of performance and noting expectations are currently high.

Political Environment and Tax Reform
Despite the overall optimism, high-net worth individuals point to several challenges that persist in the economic and investment landscape, chiefly the uncertain political environment and policy.

  • Two thirds (64%) cite concerns over how U.S. tax reform will affect their personal investing decisions, well ahead of concerns of a potential repeal of Dodd-Frank (47%) or infrastructure spending (38%).
  • Californians are most apprehensive about the national political environment with 65% indicating it has negatively impacted the national economy, compared to just 55% of those living in New York or New Jersey.

In reviewing the data, some panel experts believe tax reform could improve the national economic landscape especially if a loer corporate rate paves the way for repatriation of overseas funds for domestic companies.

"It would ultimately benefit the U.S. economy to have all that cash back on U.S. shores," explains Randy Watts, Executive Vice President and Chief Investment Strategist at William O'Neil + Co. "Developing a tax bill that encourages companies to onshore this cash would be accompanied by considerable economic and investment opportunity."

"If there is a new bill, it might offer marginal improvements as the current system is complicated and messy," said Robert "Reg" Gipson, President and Chief Investment Officer at Alpha Analytics Investment Group. "The current system is sufficient if no tax reform occurs, but if a new bill does pass, it could make the economy slightly more efficient."


Technological Innovations
While technological disruption offers opportunity, the digital divide also has some effects that need to be addressed, particularly in the long-term.

  • Almost three quarters (72%) believe the rise of technology and automation will positively impact the national economy and two thirds (66%) are optimistic technology and innovations will enhance investment opportunities, ahead of U.S. earnings (58%) and other factors.
  • Only 40% high net-worth individuals see retail disruption by tech giants as a concern for real estate, contrasting some experts' views.

"There are incredible shifts taking place across the real estate landscape, from malls dying as e-commerce rises, to technology-powered delivery services turning restaurants into industrial kitchens, to Whole Foods transforming from store space into Amazon lockers," said Ronald Greenspan, Senior Managing Director in FTI Consulting's Corporate Finance & Restructuring segment and National Co-Leader of the firm's Real Estate and Structured Finance Group. "The impacts of technology on the retail space are breathtaking and will continue to upend the real estate landscape for years to come."

"From a long-term perspective, the U.S. educational system is suffering while that of China and other nations is quickly accelerating," notes Wendy Paskin-Jordan, Founder and CEO, Paskin Capital Advisors and Commissioner, San Francisco Employees' Retirement System. "To fully realize the benefits of technology and the future of economic growth, we must invest in our education system so that all are equipped to contribute and see returns."

Real Estate
The CTBC report reveals sentiment is mixed when considering specific investment categories and the connected dynamics in real estate.

  • The wealthy are most concerned about housing affordability (75%) and rising interest rates (60%).
  • Another 78% believe foreign investment in the real estate market is important.
  • With rising property prices and generations shifts, 41% say multi-family rentals represent the greatest investment opportunity in today's market among several categories.

Equity Markets & Other Investment Vehicles
High net-worth individuals point to areas of opportunity in particular investment vehicles, while the panel of experts was mixed on best avenues. A plurality or 49% of the affluent believe stocks offer the greatest investment opportunity in the current landscape, followed by managed funds (25%), real estate/REITs (15%) among the top picks on a choice list that also included commodities, bonds, cash and other vehicles.

"It's possible that U.S. stock markets are significantly affected by perceived near to mid-term business-benefits from possible tax and regulatory reform," said Roy Salter, Senior Advisor and Leader in FTI Consulting's Valuation and Financial Advisory Services Group in cautioning against optimism in equities. "This near-term orientation may be blinding investors to longer term structural issues posing significant market risk including increasing deficits causing asset-inflation and increased separation of rich from poor, and increasing global resource constraints, conflicts and environmental damage from population growth and environment-mismanagement."

For a full copy of the survey, please click here.

About the CTBC Bank Survey and Methodology

CTBC Bank commissioned FTI Consulting (NYSE: FCN) to conduct the CTBC Bank survey of a select group of high net-worth individuals with $1 million or more in investable assets residing in California, New York, and New Jersey to gain insight into perceptions of the current economic, investment and real estate landscapes amidst uncertainty and risk. The survey explored how these individuals are evaluating and understanding risks, where they see areas of investment opportunity and challenges, and how they plan to navigate these risks with investment and real estate decisions. The CTBC Bank Survey: Managing Risks was conducted online between October 3rd and 11th, 2017. Respondents consisted of 508 high net-worth individuals with $1 million or more in investable assets, with just over half, 258, residing in California, 127 residing in New York, and 123 residing in New Jersey.

About CTBC Bank Corp. (USA)
CTBC Bank USA is a trusted and established institution providing commercial and retail customers with a real financial bridge to the next state of their lives and businesses. Founded in 1989 and headquartered in Los Angeles, CTBC Bank operates branches in California, New Jersey, and New York. The bank's operations include deposits, loans, credit cards, foreign exchange, letters of credit, wealth management, mobile, and electronic banking services. Customers benefit from access to large bank resources coupled with individual attention and customized service of a small bank. Its parent company, CTBC Bank Co. Ltd., is supported by more than $110 billion in assets and is among the largest banks in the world in terms of capital. For more information about CTBC Bank, visit www.ctbcbankusa.com .


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