Fidelity Checks Its Wealthy Customers’ Pulse

Market Conditions

• Just 46% of high-net-worth investors thought that the market would end 2012 higher than its current levels, and 30% believed it would be down from current levels.
• Despite market pessimism, these investors still expected positive returns. When asked about their average long-term annual return, investors said 5.8%, which compared with the 1.3% annualized S&P 500 return from the previous five years.
• Only 34% of respondents believed the current market rally was sustainable. This lack of confidence may explain why 54% of investors were only partially invested or slowly re-entering the market.

Taxes

• Fifty-six percent of high-net-worth investors believed that politicians would postpone a decision on taxes and spending until 2013 when a new Congress was in place. Thirty percent believed a modest short-term compromise would be achieved.
• Potential income tax increases were the greatest concern of respondents (35%), with capital gains tax increases second (27%).
• The top three steps half of respondents said they could take in anticipation of tax increases were converting retirement assets to a Roth IRA (12%), accelerating income into 2012 (12%) and deferring losses or deductions into 2013 (10%).

Investment Opportunities

• Forty-five percent of high-net-worth investors believed that large cap equities offered the greatest potential upside over the next 12 months. This was followed by mid-cap equities (29%) and small-cap equities (26%).
• For the next 12 months, the energy sector was investors’ top choice (22%) for earnings potential. Information technology and health care were tied for the second spot at 19%. 
• While 32% of investors were already in the biggest emerging markets (Brazil, Russia, India and China), only 12% were investing in smaller emerging markets in Asia, Africa or Latin America.

“Successful investors keep their eyes focused on their long-term goals, in spite of short-term turmoil,” John Sweeney, executive vice president of Fidelity Planning and Advisory Services, said in a statement.

“By cutting through the day-to-day noise, managing risk and looking for long-term opportunities, our high-net-worth investors are exhibiting just that kind of mindset.”