A Spectrem Group white paper released Thursday shows that investors entered 2016 with a preponderance of caution and an expectation of volatility.
Spectrem said it was unlikely investors would panic absent an unexpected cataclysmic event. However, they may “stay on the sidelines” for much of the year.
The report examines monthly indexes throughout 2015 for millionaire households and for affluent households with a net worth of more than $500,000, not including primary residence. These indexes are based on research Spectrem conducts at midmonth, with a total of 8,054 respondents — an average of 671 per month.
The index is measured on a scale of -50 to +50. The sub-categories are defined as follows:
- 31 to 50 Bullish
- 11 to 30 Mildly bullish
- 10 to -10 Neutral
- -11 to -30 Mildly bearish
- -31 to -50 Bearish
In 2015, millionaire investors were generally more confident than their affluent counterparts, maintaining the same confidence level in December as they had in January.
The Millionaire Index was in “mildly bullish” double-digits for 10 of the 12 months of 2015, and ended the year at 11, only one point higher than it had been in January.
The Affluent Index began 2015 in neutral territory, at an indicator of 7, and ended in December at 3, still neutral.
Investors entered 2016 with an overall perception that they should keep their assets “on hold” and not invest in the market, researchers found.
At the same time, during 2015 some 40% invested in stock mutual funds and 35% invested in individual stocks, with millionaires being more likely than the affluent to choose stocks.
Although investors tend to retain assets in cash when their confidence declines, at the end of 2015, interest in cash investments fell even as confidence levels dropped. Spectrem suggested that investors had begun to look for buying opportunities, but lost momentum because of January’s market volatility.
The white paper said another factor that drives the investor confidence indexes is household outlook, a monthly measure of four financial factors — based on a total of household income, household assets, company health and the economy — that affect investors’ daily lives.
The household outlook for investors dropped throughout 2015, from 25.60 points to 15.30 points, mainly because of decreasing confidence in the economy.
Confidence in respondents’ own household income and company health was fairly consistent, while their outlook regarding household assets began to fall in late 2015, continuing into the new year.
The millionaire outlook posted a higher reading than the affluent outlook in 11 of the 12 months in 2015. In May, the affluent outlook hit its highest level since February 2006, driven in part by a strong jobs report issued that month.
At the end of 2015, 35% of respondents said stock market conditions were influencing their overall investment plans most, with millionaires slightly more worried than the affluent.