Cloudy economic forecasts at the start of summer have shaken the confidence of many affluent investors.
A new report out from Spectrem Group indicates that the affluent household outlook has fallen to its lowest point in six months, the millionaire investor confidence index fell to its lowest point in five months, and the affluent investor confidence remains in the red after gaining only one point for June.
“These attitudes were no doubt influenced in part by less than encouraging economic news in June,” the report said.
Statistics such as a rising unemployment rate and higher numbers of Americans seeking unemployment benefit knocked investors’ cool, according to the report. Political uncertainties at home and in Europe also led investors to feel less hopeful.
As a result, many millionaires surveyed chose to “not invest” in June. After the number of millionaires investing climbed 1.6 points in May, it dropped 1.2 points to 35.6 in June. Spectrem group’s indices for sentiment are scaled from -51 to +51. The band from -51 to -31 is considered bearish, -11 to -30 is mildly bearish, -10 to 10 is neutral, 11 to 30 is mildly bullish, and 31 to 51 is bullish.
Stocks took some of the brunt of the pullback. Investment in stocks flopped 1.7 points to 30.7 after gaining 1.8 in May.
Stock Mutual Funds, on the other hand, posted the biggest gain for June, rising 5.6 points to 31.6. Similarly, Real Estate rose to a 10 month high after jumping 3.3 points to 12.7.
For millionaires, Real Estate was the “investment of choice.” Among that demographic alone, Real Estate rose 6.6 points to 15.7, nearly double the overall jump of affluent households. Likewise, Bond Mutual Funds and Bonds fell out of favor with those high net wealth individuals, dropping 1.6 and 0.7 points to 14.4 and 10.5 respectively.
Alternatively, wealthy, non-millionaire investors were more prone to take chances in the market. Though the number of those not investing was still at a three month low, there were fewer individuals with less than $1 million who abstained than millionaires. For those of this group who did invest, Stock Mutual Funds were the preferred route.
More than a fourth of all affluent investors surveyed said that they believed the most serious threat to their household was the “inability for lawmakers to work together to find solutions to the prolonged economic downturn.” That percentage rose from 20% who were concerned with government gridlock three months ago.
An almost equal segment, 22%, of affluent households considered the chance of inflation and 8.2% unemployment to be the most discouraging factors. Additionally, those concerned with the ongoing Eurozone crisis more than doubled from 5% to 12% over the last three months.
Spectrem, a research and consulting firm that specializes in affluent and retirement markets, conducts nearly 250 monthly interviews with investors or financial decision-makers with over $500,000 in investable assets.