Americans of all ages watch political and government news today more than they have in decades. President Donald Trump’s first few months in office have been tumultuous, and continuing matters related to health care, personal and corporate tax reform and the eventual new budget under Trump have created an atmosphere of quiet upheaval.
The effects of the state of uncertainty have reached the financial world. Although the stock market index remains near an all-time high thanks to Trump’s election and his promise to curtail business regulations, the numbers have been not only steady but often unmoving, an indication that investors are being careful.
The May Spectrem Millionaire Investor Confidence Index reflects that cautious outlook, and perhaps shows an actual level of concern among Millionaire investors. For the first time in the 13-year history of the SMICI, the number dropped 17 points, from what had been a four-year high of 20 to a very tepid 3. The previous largest drop had been 15 points back in Oct.-Nov. 2008, when the SMICI was heading toward its all-time low of -34 in February of 2009.
The confidence of investors can be shaken by minor events related to the economy and business atmosphere. This drop in the SMICI indicates that investors are either concerned about the questions that exist about the future of business in America, or they simply don’t know what is about to happen and don’t want to invest until some matters are settled.
The SMICI showed a drop in stock mutual fund investing from 40 percent of Millionaire investors involved to just 31.60 percent, with a corresponding rise in investors simply choosing not to invest for the next month from 34.80 percent to 40.40 percent. That mark was at 40.80 percent back in December of 2016 when the transition was taking place between the Obama administration and the Trump administration and nobody knew anything about what was about to take place.
It is not possible to know for certain that the retreat of Millionaire investors is directly related to the political climate, but the Spectrem’s monthly survey of investors asked them to select the news item that was most affecting their economic outlook for the month, more than half (54 percent) said the political environment was the No. 1 issue. The only issue that received even 10 percent of the vote was taxes at 14 percent.
At perhaps no time since 2008 has it been more important for advisors to stay current with the national political and economic news. Investors are obviously reflection on issues and will need up-to-date and knowledgeable information regarding these issues from their financial advisors.
It’s not just Millionaires who are affected by the state of economic affairs today. The overall Spectrem Household Outlook dropped to 24.40, the lowest mark since October of last year, when the election weighed upon all of us.
The Outlook, which reflects investor attitudes towards four key components of their daily financial lives, reflected drops in optimism toward the economy, their company health and their household assets. Only household income saw an increase.
Is there any good financial news on the horizon? Is the health care issue going to be completed any time soon? Does health care need to be addressed before taxes and the overall budget can be pursued? Are investors going to have any reason to jump back in now that so many of them are on the sidelines?
Advisors must be prepared. They must guard against continued pessimism while awaiting the possible political movement on those key controversial topics that can get us all back into a mood to invest in the future of business in America.