Millionaires, mass affluent bemoan markets but double down anyway

Mass-affluent and millionaire investors may not be bullish on the U.S. economy, but they continue to put more money into the markets, according to the latest results from the Phoenix Marketing International Global Wealth Monitor survey.
Mass-affluent investors — those with between $250,000 and $1 million in investible assets — view the economy negatively with 52% extremely or mostly pessimistic, versus 42% who are optimistic. The dreary sentiment has trended slightly worse since last autumn.
Although bearish on the economy, they are bullish on the markets.
“Even though sentiment on the U.S. economy is somewhat negative for both mass-affluent and millionaire investors, the mood is to put money in play rather than sit on the sidelines,” said David Thompson, Managing Director for Phoenix Marketing International.
The percentage of the mass-affluent investors who plan to add to their investment portfolios has risen steadily from 20% last July to 33% at the end of April when the latest bimonthly survey was circulated. Just 7% plan to decrease their investments, while 59% plan to make no change — the lowest reading on this measurement since December 2007, Mr. Thompson said. “Coming out of the downturn in the markets, people were playing a waiting game, but they have picked up their investing in the last year,” he said.
Retirement accounts remain a focus for their investments. The April/May results continue a four-period trend of increases in the percentage of people who have added to their retirement accounts. Twenty nine percent have increased their investments, versus 27% in the February survey. Business investments, on the other hand, had the largest drop in the percentage of investors who have increased their spending in the activity — falling from 10% in February to just 4% in April. Seven percent have decreased their business investment activity.
A sign that mass-affluent investors may not have entirely bought in to the market recovery is the fact that they have continued to increase their contributions to deposit accounts over the last three periods — despite near-zero interest rates on the accounts. Twenty seven percent have added to their deposits in the last two months. Increases were also strong in stocks (24%) and mutual funds (18%) but less so in bonds and fixed-income instruments (9%).
“They could be using the deposits as a holding account and may be ready to put more money in play when opportunities arise,” Mr. Thompson suggested. “We’re not seeing a sidelines mentality in this group, so we interpret it as investors’ being ready to deploy the funds.”
The millionaire households, on the other hand, may be truly squirreling away more cash. As a group, they are somewhat more optimistic on the economy than the mass-affluent investors, but their outlook has similarly been deteriorating. Unlike the mass affluent, a lower percentage (43%) of millionaire households plan to increase their investments than in the February period (47%). But 34% of them also have added to their deposit accounts, and that may be a sign that they are starting to hedge their bets.
“The millionaires are better-advised and have greater liquidity. They are typically about six months ahead of the curve, versus the mass affluents,” Mr. Thompson said. “They have been back in the market longer and they appear to have pulled back some in April. The additional cash may be a safe harbor for them.”
The Global Wealth Monitor canvasses mass-affluent and millionaire households every two months to gauge their sentiments on the economy and investment markets, and to monitor changes they have made and plan to make to their asset allocations. The April/May survey received 1,167 responses from investors.

Related Topics: Wealth Management