Cautious outlook yields more conservative investments
The Spectrem Affluent Investor Confidence Index (SAICI®) dropped 11 points to -13, its lowest reading in one year, and the biggest month-to-month plunge since June 2011. The Spectrem Millionaire Investor Confidence Index (SMICI®) fell 8 points to -6, a three-month low.
The Indexes measure the investment confidence and outlook of households with $500,000 or more in net worth.
This setback in Affluent investor confidence was perhaps precipitated by increased concerns over the looming fiscal cliff, the tax cuts and mandatory spending cuts scheduled to take effect at the end of the year if a bipartisan solution towards solving the nation’s deficit is not reached.
When asked what news stories were most affecting their economic outlook, nearly half (48 percent) responded “the political environment,” while nearly one-third (32 percent) said “the fiscal cliff. The two are inextricably linked. In a separate survey conducted this month by Millionaire Corner, 62.5 percent of affluent respondents said they were not confident that Congress would resolve the issue in time.
With the deadline looming, no discernible progress made toward an agreement, Affluent investors are considering the impact going over the cliff will have on their portfolio. In a Millionaire Corner survey conducted in October, 43 percent of Millionaire investors said they were likely to change their asset allocation should lawmakers fail to find a solution.
In what is perhaps an indication of their cautious economic outlook, Affluent investors were more conservative in their investments in November. There was a marked increase in investments in Bond Mutual Funds, as well as an uptick in investment in Cash. But more Affluent investors chose to stay on the sidelines.
The Spectrem Affluent Household Outlook, a survey of attitudes toward financial factors that impact Affluent investors’ daily lives, took a dramatic turn for the worse, a further indication of concerns over the fiscal cliff or perhaps just a case of PETS (Post Election Trauma Syndrome). The overall Outlook fell to its lowest reading since August 2011.
The Conference Board Consumer Confidence Index released Tuesday posted a slight increase for the third consecutive month, but the current reading, 73.7, is below 90, which is indicative of a healthy economy.
Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.
A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.