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Time to sell the stock? Half of millionaires predict “economic decline” 40 per cent of them plan “to buy national debt”.

ZUU Online SG logo ZUU Online SG 12/1/2019 ZUU
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CNBC Research revealed that millionaires are more likely to increase their focus on short-term investment, cash and bonds rather than stocks. Conversely, millionaires with 5 million dollars or more plan to strengthen their stock buying.

As the US and China’s trade war heats up, less than half of millionaires are optimistic when it comes to the economy, causing widespread anxiety. This is a particular trend among younger millionaires.

Less than half of millionaires think that “the economy will get stronger”

The survey gathered the opinions of 750 Americans nationwide in April 2018. Responses such as “short term investments are going up” and “unwilling to commit more to the stock market in the next year” increased compared to previous research in 2017.

In June, Global equity funds experienced their biggest outflows since 2008, at 12.4 billion dollars. As a result, some wealthy investors seem concerned about the stock market.

25% of respondents said they plan to increase short term holdings, while 17% said they will add to stock exposure in the next year (CNBC, June 28th, 2018).

Moreover, the survey revealed that 44% of millionaires think the economy will be stronger at the end of 2018, 6 points down from 2017.

Political unrest and national debt influences millionaires

Only 19% of Democrat millionaires believe the economy will be stronger by the end of the year, 66% of Republican millionaires believe the same, but this number reduced 7 points compared to last year. Among Independents, 44% has reduced to 40%, as the percentage who believe that the economy will be stronger at the end of 2018.

42% of millionaires said that “government dysfunction is the biggest risk to the US economy over the next 12 months”, and 17% agreed that national debt is another concern to the economy today, up 4 points. On the contrary, the threats of “Global unrest” and “Terrorism” are seen as less important in 2018.

S&P 500 confidence dropped 20%

Millionaires’ view of the US stock market has weakened significantly, as measured by the S&P 500 index.

56% of those surveyed think that the S&P 500 will “end the year up by at least 5%”, this has decreased by 22%. The S&P 500 ended 2017 up by more than 21%, but it increased a little less than 2% in the first half of 2018.

75% of Republicans expected the market to “rise within the year”, meanwhile 43% of Democrats expected the S&P to end the year “with a big gain”, and 35% expected “a loss of 5% or more”.

Democrat and Republican millionaires disagree when it comes to the predicted financial situation of their kids in the future. With a 5% rise to 42%, Democrats say that “their kids will be worse off financially than they are”. However, the number of Republican millionaires who said their kids will be better off financially than they are is now 42%, an 8% increase (CNBC June 26, 2018).

25% of Republicans said that “they plan to spend more over the next year”, this has increased 8 points. 17% of Democrats are “planning to spend less than in 2017” this also rose from 13%.

Millionaires under 55 quickly “move out of stocks”?

The investment strategy of millionaires changes due to the economic situation.

The move out of stock and into safer investments is most pronounced among younger millionaires and high-net-worth investors. 38% of millionaires aged 55 and below said that “they will increase short-term investments such as cash, money market accounts CDs, treasury bills, checking and savings accounts”.

Meanwhile, 34% of millionaires with 5 million dollars or more in investable assets said that “they will increase short-term holdings”.

Also, 35% of millionaire investors aged 55 or below, and 37% of investors with over 5 million dollars in investable assets mentioned that “they will increase fixed-income holdings such as national debt and bonds”.

Younger millionaires need cash?

Doug Boneparth, the president of the New York City-based Bone Fide Wealth, said: “millionaires aged 55 and below do need more short-term money”. It is because their lives include more variable expenses, such as children and college, than older investors.

He believes that after experiencing the financial crisis of 2008, these investors do have some funds to hand in case of another crash. But he wonders how many millionaire’s investors have prepared in this way.

As well as Boneparth, experts including financial advisors say “wealthy investors are waiting for stocks to correct before seizing a buying opportunity”. Younger millionaire investors are more likely to maintain or increase investment in international stocks and alternative investments.

They also advise distinguishing between cash holdings and investment holdings. For example, if 150,000 dollars of a 1 million dollar individual retirement account is in cash, that’s too high. As a result, it will drag down returns over time.

It is better to invest wisely with market impact and asset balance.

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