Millionaire investors are betting on double-digit declines in stocks next year, reversing their most bearish forecast since 2008, according to the CNBC Millionaire Survey.
Fifty-six percent of millionaire investors surveyed expect the S&P 500 to decline by 10% in 2023. Nearly a third expect a decline of more than 15%. The survey was conducted among investors with investable assets of US$1 million or more.
They also expect stocks to drop to reduce their fortunes. When asked about the biggest risk to their personal wealth over the next year, the largest number (28%) said the stock market.
The last time millionaire investors were this pessimistic was during the financial crisis and the Great Recession more than a decade ago.
“This is the most pessimistic we’ve seen for this group since the financial crisis of 2008 and 2009,” said George Walber, president of Spectrem Group, which conducts the poll with CNBC.
Walber said inflation, rising rates and the prospect of a recession are all on the minds of wealthy investors. And while the markets have already fallen this year, Standard & Poor’s 500 At 18%, wealthy investors expect more pain in the coming year.
The bleak outlook could also put additional pressure on markets, as millionaire investors own more than 85% of individual stocks. More than a third of millionaires expect their total investment returns (which include bonds and other asset classes, along with equities) to be negative next year. Most expect returns of less than 4%, which is low considering that short-term Treasurys now yield returns of more than 4%.
Many millionaires are holding onto the money and plan to remain on the sidelines, at least for the foreseeable future. Nearly half of millionaire investors (46%) have more cash in their portfolios than a year ago, with 17% owning “much more.”
Millionaires are also bearish about the economy, with 60% expecting the economy to be “weaker” or “much weaker” at the end of 2023.
However, there is a huge optimism gap between younger and older millionaires. Eighty-one percent of millennial millionaires expect their assets to be higher at the end of next year, and nearly half (46%) expect their assets to increase by 10% or more. By contrast, most millionaires (61%) of baby boomers expect their assets to be less or “much less” in the coming year. More than half of millennials say the S&P 500 will rise 10% or more next year.
Millennials grew up in a financial world of low interest rates and high asset prices, Walber said, where market sell-offs are usually followed by quick rebounds. Older generations, he said, may remember the world of hyperinflation and the escalating rate of the 1970s and early 1980s, when the Standard & Poor’s index drifted lower for more than a decade.
“Millionaires have never lived in a truly inflationary environment,” Walber said. “In their entire working lives, they’ve seen interest rates run by the Fed. They’ve never seen rates go up so aggressively.”
Millionaire pessimism also influences the opinions of their financial advisors. The majority say they have consulted “very little” or “no at all” with their financial advisors about how to prepare for inflation. Levels of approval for financial advisors have “never declined so quickly, at all levels of wealth,” Walber said.
“They feel like they’re advisors who don’t communicate with them or prepare them for how to handle it,” Walber said. “They don’t talk to them about what all this means for their financial future.”
The CNBC Millionaire Survey was conducted online in November. 761 respondents, representing the financial decision-makers in their families, are eligible for the survey. The survey is conducted twice a year, in the spring and fall.
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