Affluent investors indicate that in the coming month, they are most likely to hold on the investment sidelines, according to our monthly investment preferences survey, one of the drivers of the Spectrem Affluent Investor Confidence indices for Affluent and Millionaire households.
Affluent investors also indicate they will decrease investment in Equities and increase their investment in Bonds in the coming month.
Each month, Spectrem Group surveys Affluent investors as to how they will invest in the short term. In May, the highest-expressed intention (38.80 pts., unchanged from the previous month) was to hold on the investment sidelines, followed by Stock Mutual Funds (32 points) and Stocks (28.40 pts). But the intention to invest in Stock Mutual Funds declined 11 percent from the previous month, while intention to invest in Stocks was basically unchanged. Intention to invest in Bonds, meanwhile, almost doubled to reach to a two-year high, while Cash ticked upward 2 percent.
The Spectrem Affluent Investor Confidence indices declined in May for the first time since February. The May Spectrem Millionaire Investor Confidence Index (SMICI®) dropped 6 points to 5, while the Spectrem Affluent Investor Confidence Index (SAICI®) fell 4 points to 0. The indices are down 10 points and 8 points, respectively, from May 2015.
According to our research, Millionaires and non-Millionaires intend to hold on the investment sidelines at the same level as the previous month. Among Millionaires who do plan to invest, intention to invest in Stock Mutual Funds fell 14 percent in May while intention to invest in Stocks dropped 25 percent. Intention to invest in Cash increased 8 percent.
In contrast, intention to invest in Stocks gained 41 percent among surveyed non-Millionaire investors. Intention to invest in Stock Mutual Funds declined 5 percent from the previous month, while intention to invest in Bonds increased six-fold. Intention to invest in Cash decreased 5 percent.
We find a marked investor confidence gap between men and women. The May SAICI for men is at 5 and for women at -8, while the SMICI for men is at 7 and for women at 2. This is reflected in their investment preferences. Affluent women are significantly more likely than men in the coming month to hold on the investment sidelines (48 pts. vs. 32.7pts.) . Compared with women, Affluent men look to be more invested in Stocks (32 pts. vs. 23 pts.) and Cash (21 pts. vs. 16 pts.) and just over twice as likely to be invested in Bonds in the coming month (13.3 pts. vs. 6 pts.)
There is another investment confidence gap between Affluent investors based on political party affiliation. Affluent investors who identify as Democrats are more likely than their Independent and Republican counterparts to indicate they will hold on the investment sidelines in the coming month (55.4 pts. vs. 38.5 pts. and 30.9 pts., respectively). Republicans, meanwhile, indicated the stronger intention to invest in equities in the coming month, followed by Independents and Democrats. Tellingly, the May SAICI for Republicans is at 5, but at -2 for Independents and -4 for Democrats.
The Spectrem Affluent Investor Confidence indices provide insights into how these investors want to invest in the coming months. If that is different from what you are recommending, you need to have a discussion with your clients to review investment strategies.