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What’s to Blame for ‘Record-Breaking’ Drop in Millionaire Investor Confidence

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While U.S. markets continued their bullish run in May, confidence among wealthy investors plummeted, according to Spectrem’s Millionaire Investor Confidence Index.

The Spectrem Millionaire Investor Confidence Index (SMICI) experienced a drop of 17 points in one month, falling from the four-year high of 20 in April to 3, the largest monthly drop in its 13-year history.

Spectrem attributes this drop to the political atmosphere and the lack of cohesive government.

“Even though the stock market remains at near-record high levels, millionaire investors are becoming increasingly cautious,” said Spectrem President George H. Walper Jr in a statement. “This is likely due to growing concerns about the weakening political position of President Trump given recent controversies, the declining likelihood of substantive tax reform in the near term, as well as concerns about the recently submitted proposed federal budget. Although non-millionaires also recorded a drop in confidence, the fact they are slightly more confident now than millionaires is a strong indication that we may be entering a tumultuous period for investors.”

The Spectrem Affluent Investor Confidence Index (SAICI) declined four points to 6. It is the first time the SAICI has eclipsed the millionaire index since May 2011.

The monthly Spectrem Affluent Investor Confidence index tracks changes in investment sentiment among the 17 million households in America with more than $500,000 of investable assets. The Spectrem Millionaire Investors Confidence Index (SMICI) reflects the investment sentiment of households with more than $1 million in investable assets. The May fielding was conducted from May 19 to May 23.

The record-breaking drop in the millionaire investor index was caused by the 39% of millionaires who indicated they plan to avoid investing in the coming month, which is 15% more than in April. According to Spectrem, it is the highest percentage of millionaires declaring their intention to “stay on the investing sidelines” since December 2013.

By comparison, the non-millionaires were much more willing to invest, with percentage increases in every category except cash investing (which is the least confident form of investment options). The percentage of non-millionaires choosing not to invest dropped to 41.6%, 2% higher than that of millionaires. 

Spectrem believes that declining investor sentiment among millionaires may be a result of a turbulent month in Washington that has generated significant doubt about prospects for the Trump administration to deliver on promised substantive tax reform.

The survey found that more than half of all investors surveyed (54%) cited the political environment as the story in the news most affecting their economic outlook, placing it dramatically ahead of any other topic. Taxes were the second most sigificant story, cited by 14% of respondents.

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