Millionaire investors are betting on double-digit stock declines next year, reflecting their most bearish outlook since 2008, according to the CNBC Millionaire survey.
Fifty-six percent of millionaire investors surveyed expect the S&P 500 to fall 10% in 2023. Nearly a third expect declines of more than 15%. The survey was conducted among investors with $1 million or more in investable assets.
They also expect falling equities to reduce their wealth. Asked about the greatest risk to their personal wealth over the next year, the largest number (28%) said the stock market.
The last time millionaire investors were so bleak was during the financial crisis and the Great Recession over a decade ago.
“This is the most pessimistic group we’ve seen since the financial crisis of 2008 and 2009,” said George Walper, chairman of Spectrem Group, which is conducting the survey with CNBC.
Inflation, rising rates and the potential for recession all weigh on the minds of wealthy investors, Walper said. And while the markets have already fallen this year, with the S&P500 down about 18%, affluent investors expect even more difficulties next year.
The gloomy outlook could also put additional pressure on the markets, as millionaire investors hold more than 85% of the shares held by individuals. More than a third of millionaires expect their overall investment returns (which include bonds and other asset classes, as well as stocks) to be negative next year. Most are expecting returns below 4%, which is low given that short-term Treasuries are now yielding over 4%.
Many millionaires are holding cash and planning to stay on the sidelines, at least for the foreseeable future. Nearly half (46%) of millionaire investors have more cash in their portfolio than last year, with 17% holding “much more”.
Millionaires are also bearish about the economy, with 60% expecting the economy to be “weaker” or “much weaker” by the end of 2023.
There is, however, a large gap in optimism between younger and older millionaires. Eighty-one percent of millennial millionaires expect their assets to be higher at the end of next year, with nearly half (46%) expecting their assets to increase of 10% or more. In contrast, most (61%) of millionaire baby boomers expect their assets to be lower or “much lower” next year. More than half of millennial millionaires say the S&P 500 will rise 10% or more next year.
Walper said Millennials have grown up in a financial world characterized by low interest rates and rising asset prices, where market selloffs have typically been followed by rapid rebounds. Older generations, he said, may remember the high-inflation, rising-rate world of the 1970s and early 1980s, when the S&P fell for more than a decade.
“Millennial millionaires have never lived in a true inflationary environment,” Walper said. “All their working lives, they’ve seen Fed-managed interest rates. They’ve never seen such aggressive rate hikes.”
The pessimism of millionaires also affects their opinion of their financial advisors. A majority say they have consulted “very little” or “not at all” with their financial advisors on how to position themselves in the face of inflation. Walper said approval levels for financial advisers “have never dropped so quickly, at any level of wealth.”
“They feel like their advisers aren’t communicating or preparing them on how to deal with it,” Walper said. “They don’t talk to them about what all of this means for their financial future.”
The CNBC Millionaire survey was conducted online in November. A total of 761 respondents, representing financial decision makers in their household, qualified for the survey. The survey is conducted twice a year, in the spring and in the fall.
0 Comments