Wealthy investors do not, on average, believe a full-blown economic recession is in America’s near future.
They do, however, are more likely to believe a recession could happen before the 2020 Presidential election than they were two months ago.
In January of 2019, the Treasury bond yield curve inverted, indicating that the return on 2-year bonds was higher than the anticipated return on a 10-year bond, which is not supposed to happen. That economic indicator has almost always preceded a recessionary period, among the economic slowdowns which have occurred in the past 100 years.
No real recession occurred at that time. But then, in the summer of 2019, the Treasury bond yield curve inverted numerous times, and recession fears grew stronger among wealthy investors.
By September of 2019, investors had heard enough about the possibility of a recession that they began to believe the press clippings. They were not changing their investment habits enough to impact the stock market, but they did have the possibility of recession their minds.
Every month, Spectrem asks investors to consider a couple of current event topics, and in September, investors were asked to gauge their anticipation of a recession before the next presidential election in November of 2020.
The same question was asked in July of 2019, and comparing the two surveys indicated that investor belief in an upcoming recession is on the rise.
The investors were asked to put their belief in an upcoming recession on a 100-point scale, with “100”’ indicating that a recession is very likely. In July, the average response was 39.13, which is a low reading, but not overwhelmingly so. In September, the rating was 44.22 among all investors, a 5-point jump in recession expectations in two months.
The investors surveyed were segmented demographically, and as expected, investors who vote Republican (31.54) had a lower level of belief in an upcoming recession than those who vote Democratic (58.25) in the September survey. Note that the Democratic rating is above the midpoint. Those investors who consider themselves Independent politically rated the belief in an upcoming recession at 44.80.
Also, those investors with a net worth between $100,000 and $500,000 (not including the value of their primary residence) rated their belief in an upcoming recession at 50.52 in September, compared to a rating of 40.56 among investors with a net worth between $15 million and $25 million.
There was also a range from high to low based on the age of the investor, from a rating of 49.07 among Millennials to a rating of 40.19 among World War II-era investors.
©2019 Spectrem Group
Keywords: hot topics, recession, economy, investors, advisors, Spectrem