Millionaire investors are betting on double-digit falls in stocks over the next year, according to the CNBC Millionaire Survey, reflecting their most pessimistic outlook since 2008.
56% of surveyed multimillionaire investors expect the S&P 500 to fall 10% in 2023. Almost a third expect a drop of more than 15%. The survey was conducted among investors with investable assets of US$1 million or more.
They also expect that falling stocks will reduce their wealth. When asked about the greatest risk to their personal wealth over the next year, the largest number (28%) cited the stock market.
The last time multimillionaire investors were so gloomy was during the financial crisis and Great Recession more than a decade ago.
“This is the most pessimistic assessment by this group since the financial crisis of 2008-2009,” said George Walper, president of the Spectrem Group, which conducts the poll with CNBC.
Inflation, rising interest rates and the potential for a recession are weighing on wealthy investors, Walper said. And while markets have already fallen this year, with the S&P500 Down about 18%, wealthy investors are predicting even more pain next year.
The bleak outlook could also put additional pressure on markets, as multimillionaire investors own more than 85% of individually held shares. More than a third of millionaires expect their total investment returns (which include bonds and other asset classes in addition to stocks) to be negative over the next year. Most are expecting returns of less than 4%, which is low considering short-dated Treasuries are now yielding over 4%.
Many millionaires are holding cash and planning to stay on the sidelines, at least for the foreseeable future. Almost half (46%) of multimillionaire investors have more cash in their portfolio than last year, with 17% holding “a lot more.”
Millionaires are also pessimistic about the economy, with 60% expecting the economy to be “weaker” or “much weaker” by the end of 2023.
However, there is a large optimism gap between younger and older millionaires. Eighty-one percent of millennial millionaires expect their wealth to be higher by the end of next year, with nearly half (46%) expecting their wealth to increase by 10% or more. In contrast, most (61%) Baby Boomer millionaires expect their wealth to be lower or “significantly lower” over the next year. More than half of millennial millionaires say the S&P 500 will rise 10% or more over the next year.
According to Walper, millennials grew up in a financial world of low interest rates and rising asset prices, where market sell-offs were typically followed by quick recoveries. Older generations, he said, may remember the world of high inflation and rising interest rates in the 1970s and early 1980s, when the S&P drifted lower for more than a decade.
“The millennial millionaires have never experienced a true inflationary environment,” Walper said. “Throughout their business lives, they have seen interest rates administered by the Fed. You’ve never seen rate hikes that aggressive.”
Millionaires’ pessimism also influences their views of their financial advisors. A majority say they have talked “very little” or “not at all” to their financial advisors about how to prepare for inflation. Walper said approval ratings for financial advisors “have never come down so fast, at all levels of wealth.”
“They feel like their advisors aren’t communicating or preparing them on how to handle this,” Walper said. “You don’t talk to them about what this all means for their financial future.”
The CNBC Millionaire Survey was conducted online in November. A total of 761 respondents, representing financial decision makers in their households, qualified for the survey. The survey is conducted twice a year, in spring and autumn.