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Fearing Rate Hike, Wealthy Opting Out of Market

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The Spectrem Millionaire Investor Confidence Index plunged nine points to 6 from May to June, its lowest point in 16 months, Spectrem Group reported Tuesday.

Year over year, the index is down 10 points.

The Spectrem Affluent Investor Confidence Index fell two points in June, also to 6 — the first time since February 2010 the two indexes were recorded at the same level.

The indexes gauge the investment outlook of affluent households with more than $500,000 of investable assets and millionaire households with upward of $1 million of financial assets.

Several factors account for the decline in sentiment, Spectrem Group said.

Millionaire investors are growing more concerned about the effect on the economy of possible higher interest rates before year-end.

In addition, international investors are monitoring developments in China, whose economy is sputtering, and in Greece, which missed a 1.6 billion-euro loan payment to the International Monetary Fund on Tuesday.

And the Bureau of Economic Analysis estimated that in the first quarter, the real GDP declined at an annual rate of 0.2%.

Spectrem Group found that non-millionaire investors’ confidence in the economy and company health dropped precipitously in June, indicating, it said, that positive economic reports released during the month had not eased personal financial concerns.

“There were positive economic indicators in June, including a strong jobs report and an uptick in consumer spending,” Spectrem Group president George Walper said. “But millionaire investors, especially, are focused on the big picture in relation to an economy artificially supported by low interest rates and what will really occur when the Fed raises them.”

Walper said this partly explained why more millionaire investors said they would remain on the sidelines in the coming month.

“Coupled with the characteristically cautious mindset of non-millionaires, this led to the drop in June of the Spectrem Affluent Investor Confidence indices.”

Millionaires’ intention to stay on the sidelines increased by 5.8 points from May to June, to 35.6, the same as in June 2014.

Millionaire investors indicated their biggest retreat from stocks since April 2009, and their intention to invest in bonds dropped to the lowest reading in the indexes’ 11-year history, Spectrem Group reported.

A survey conducted by Spectrem found that affluent investors perceived the biggest threats to achieving their financial goals came from the trifecta of market conditions, the economy and the political climate.

Millionaires were more focused on the market, and slightly less concerned about the economy than their non-millionaire counterparts. The political climate concerned both groups about equally.

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