Time heals all wounds, and that is proven true in the economic outlook of Millionaire investors today, five years after the beginning of the worst economic crisis since the Great Depression.
The Spectrem Millionaire Investor Confidence Index (SMICI®) has steadily climbed to 7. While this is neutral territory for investors, it is a significant comeback from the unprecedented lows posted in the wake of the economic collapse.
This week marks the fifth anniversary of one of the most calamitous months in American financial history. On Sept 8, 2008, the government took control of Fannie Mae and Freddie Mac, which were no longer able to cover their sub-prime mortgage losses. A week later, financial services firm Lehman Brothers filed for Chapter 11 bankruptcy protection. It was the largest bankruptcy filing in American history. The Dow Jones recorded the largest single day points drop (more than 500) since Sept. 12, 2001.
In September of 2008, the SMICI®, a monthly measure of the investment confidence and outlook of households with more than $1 million in investables, dropped 9 points to -18. In November, the Millionaire mindset dropped to its low ebb of -39. On the investment front, Millionaires were more invested in the market than Non-Millionaires. When asked how they would be investing in the short term, Millionaire interest in Stocks held steady through October, while Non-Millionaires expressed their intention to back away.
For both groups of investors, investment in safer Cash investments posted the highest month-over-month gains in September 2008. But Millionaires were less likely than Non-Millionaires to say they would retreat to the sidelines and wait out the volatile developments. “Not Invest” actually dropped in September among Millionaire investors, but edged upward 1.1 points among Non-Millionaires.
Considering the apocalyptic headlines at the time, it is not surprising that Millionaires named the economy as the most serious threat to achieving their household’s financial goals. What may be surprising is just 38 percent did. But the Millionaire mindset was in a mindful mood to wait and see which institutions might fall next and whether the President and lawmakers would work together to solve the crisis.
Today, Millionaires are still wary. In Spectrem’s most recent monthly survey of investment preferences, “Not Invest” was actually at a higher reading (34.1 points) in August than in September 2008 (33 points). But intentions to invest in Stocks rebounded strongly, from 25.2 points five years ago to 36.1. And whereas intention to invest in Cash was at 35.7 in September 2008, it was at 27 last month.
In reflecting on lessons learned from the economic collapse, Millionaires are not likely to have financial regrets, according to a 2013 wealth level study conducted by Spectrem’s Millionaire Corner. Almost one-third (31 percent) said “None of the above” when asked to list their financial regrets prior to the collapse. Twenty-three percent said they wished they had saved more, while 20 percent wished they had invested more conservatively. Seventeen percent said they wish they had done more independent financial research.