There are people who enjoy the good times without worrying about tomorrow, and then there are people who will tell you “there ain’t no such thing as a free lunch”.
The record ride the stock market indices are enjoying through the summer of 2019 is good for investors, and many investors believe the good times are just going to keep on keepin’ on. A recent Spectrem poll of wealthy investors found that 59 percent believe the Dow Jones Industrial Average will be above 27,000 on Dec. 31, 2019, and 5 percent predicted it will be at or above 30,000 on that date.
But such unprecedented growth creates problems in the economy, namely inflation. And, while the American stock market rides this bullish wave, trade negotiations with China and the impending Brexit event in Europe seem to suggest that the good times could certainly end someday soon.
Which is why Spectrem surveyed more than 800 wealthy investors to ask them if they believe a recession will occur before the next presidential election in November of 2020. We are more than 10 years removed from what is known as the Great Recession of 2008, and have been seeing steady economic recovery ever since. Is it time for the markets and the economy to readjust?
Putting their belief that a recession is “very likely’’ on a 100-point scale, the average response of investors came in at 39.13, which leans toward a belief that there will not be a recession in the next 14-15 months.
There was an anticipated wide gap between the responses of the investors who lean Republican (28.89) and those who lean Democratic (48.81). Investors who proclaim their independence from party affiliations were more in agreement with Democrats than Republicans with a rating of 42.20.
What are your clients saying about the potential for a sizable downturn in the market? Do they worry about it and want to be protected? Or are they as gung-ho as the institutional investors who provide most of the impetus for the direction of the stock markets?
President Donald Trump has predicted that if he is not reelected in 2020, the markets will crash and another recession will be imminent. Do investors agree with that assessment?
According to the Spectrem survey conducted in July 2019, 15 percent do agree that the markets will crash “severely’’, while 36 percent say there will be a drop, but not a precipitous one. That’s 51 percent who believe the market will suffer in some way, at least temporarily, if President Trump is not reelected.
On the other hand, 36 percent of investors said the market will react, but will stabilize within two weeks and return to the levels they were at before the election. And 14 percent of investors believe the markets will actually rise as a result of an election that goes against President Trump.
So that’s about as even a break as one could imagine. It suggests that no one really knows how the market will react in the coming months or in November of 2020.
©2019 Spectrem Group
Keywords: recession, investors, advisors, hot topics, Spectrem, presidential election