Affluent Investors Mirror Broader Economy’s Tepid Optimism

Proportions choosing 'not investing' stance on the rise

If affluent investor sentiment is a guide, the economy continues to progress at a steady but very slow pace. The Spectrem Group, which tracks the affluent market, released its affluent investor and millionaire investor monthly confidence surveys this week, and they mirror broader consumer sentiment surveys.

The index tracking affluent investors – those households with $500,000 or more in investable assets–rose 1 point to -8, the fifth consecutive monthly increase, possibly indicating a trend beyond just a holiday-season bounce. The Spectrum Group’s millionaire confidence index – a wealthier subset of the affluent index–also rose a point to -2. Both indexes attained their highest levels since May (for affluent households) or June (for millionaires).

Spectrem says stock market conditions were paramount in their investment planning. “Pundits dubbed 2011 ‘the Year of Volatility’ … so it is not surprising that investors said stock market conditions were the one factor most affecting their investment plans. Just over twice as many affluent investors cited this issue over the next most cited factor, the economic environment,” Spectrem announced in its release.

The affluent investor survey seems to track broader surveys of consumer confidence. The University of Michigan Consumer Sentiment Index for January also gained a point–its best reading since last February. And as econ blogger Doug Short shows, that index closely parallels the NFIB Small Business Optimism Index of sentiment among small business owners; that index has also attained its highest level since last February. Unsurprisingly, these numbers remain “at a level most commonly associated with recessions,” Short writes of the Michigan survey.

Spectrem’s data seems to reflect a cleavage in affluent and millionaire investment choices.  Its survey shows affluent investors moved away from cash (from 29.7% to 28.5%) and into stocks (from 30.1% to 33.8%), though investors choosing “not investing” rose (from 32.1% to 34.7%). Millionaire investors, however, showed far greater negativity, distancing themselves from stock mutual funds (from 42.1% to 27.8%) and move far toward a “not investing” stance (from 28% to 35.1%).

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