Millionaires wish to personal rather less of all the pieces bubble subsequent yr

A trader blows chewing gum during the opening bell at the New York Stock Exchange on August 1, 2019 in New York City.

Johannes Eisele | AFP | Getty Images

If the market is in an everything bubble, wealthy Americans go into 2022 saying they really don’t want much more – of anything, according to a recent CNBC millionaires poll.

Sentiment among wealthy investors is still trending upbeat, albeit flagging, with millionaires anticipating higher interest and tax rates in 2022. 41 percent of millionaires say the economy will get stronger in the next year, up from 35 percent who say it will weaken the last year CNBC millionaires survey. A little more than half, or 52%, of millionaires expect it S&P 500 Finish 2022 with a profit of 5% or more.

But another result of the survey is the most revealing. It signals a weakening of excitement and a waning general risk appetite, even though the market has survived recent Covid-Omicron and Fed fears that the S&P 500 is setting a new record and the Dow Jones industry average stay close to the highest level ever.

Twice a year, the CNBC Millionaire Survey asks investors in which key asset classes they want to increase their exposure over the next year. Investor appetite for all types of investments is now lower than it was in the spring 2021 survey. The percentage of millionaires who say they will increase their investments has declined across all asset classes, including stocks, investment property, alternative investments, international investments and precious metals.

For the CNBC Millionaire Survey, Spectrem Group surveyed 750 Americans with investable wealth of $ 1 million in October and November.

Can’t take any more risks, can’t get out of the market

“The market is high and people are nervous,” said Lew Altfest, CEO of Altfest Personal Wealth Management. “Our customers are scared, but none of them are about to get off,” he said. “You don’t have the courage to withdraw.”

“There’s not much more you can risk with fresh dollars,” said Doug Boneparth, president of Bone Fide Wealth. “What are you going to do? Ditch all of your large caps and invest in all emerging market stocks? Nobody does.”

Thirteen years after a bull market and after a sharp spike in volatility last year resolved by government incentives and the Fed to print more money, “there is limited scope to move up, so maybe take your foot off the pedal here.” , “Said Boneparth.

That doesn’t mean market conditions that would amount to a significant reduction in risk, but it makes sense for people to step back and re-evaluate their portfolios. “It’s been a hell of a ride and the willingness to take risks has only increased in the not too distant past,” he added.

Inflation, the Fed and the Economy 2022

Even if the rich are less avid buyers of stocks, they are buyers of goods and the economy will be fine – and with it corporate profits – as long as they continue to buy everything outside of stocks at higher prices, Altfest said. When people tire of spending freely, it matters more to the economy and the market than when the rich cut back risk appetite across all asset classes, he said.

After two hugely positive years for the market in 2020 and 2021, investors are digesting the information on inflation and whether that means they should expect slower equity growth in the near future.

“These two things set the table: how much more risk can you take?” said Boneparth.

“The shyness is very evident at all of our meetings,” said Michael Sonnenfeldt, founder and chairman of Tiger 21, a network for wealthy investors.

But inflation is not an immediate threat to the rich. “If you’re worth $ 10 million and living on $ 200,000 a year, even if you’re 6% inflation, inflation won’t change your lifestyle,” said Sonnenfeldt. For the rich, fear of inflation does not mean the less fortunate in society are justified in worrying about food budgets or buying a new car. But one cannot ignore the fact that inflation can hurt the value of their assets, Sonnenfeldt said, and that makes it harder to weigh inflation against investments after investors have benefited from such an extraordinary market.

“Assets have risen more than inflation this year, more than they eroded … but next year could be a double blow where if inflation grows and the market is flat you see a loss in value,” he said. “At least there was no need to panic this year and wealth custodians grew assets faster than inflation as the Fed flooded the market. I don’t know many people in a phase of wealth preservation who haven’t outperformed inflation this year. “.”

“People are still digesting Covid and the elections, and that’s kind of a wait and see,” said Tom Wynn, director of research for the Spectrem Group. “People have to see what happens to inflation and taxes, and no one takes a position one way or another that things are much worse or better, that’s my opinion.”

Big stocks and boomers

Altfest said he wouldn’t advise an investor to time the market to be all or not at all, but he has told investors sitting on huge gains like Microsoft that it is time to sell some of their holdings. This is not a conversation that always went well, he said.

“A lot of people say, ‘The market has done me good,’ and that is especially true for people with growth stocks,” said Altfest, adding that much of the recent profits in the S&P 500 came from four technology companies, including Microsoft.

CNBC Pro Stock Pick and Investment Trends:

When investors turn back to core stock analysis, “you can’t break away from price-to-earnings multiples even if corporate earnings are growing fast. They can’t grow forever and the P / E ratios” are very high, “Altfest said.

Pressure between the title winners, who have done so well but worry about future economic and market developments, puts investors in what Alftest describes as “barely optimistic about stocks”.

Mitch Goldberg, president of the investment advisory firm ClientFirst Strategy, said every time someone told an investor to “take a little off the table at Apple and Microsoft … someday right. But we don’t know when. “

Risk the right way

An investor who hasn’t changed their portfolio this year will now hold more stocks by simply staying stable, given the recent bull market in equities and weak bond market returns, Goldberg said. And many investors are not quick to realign their equilibrium after appreciation in certain asset classes, which reinforces the process of increasing exposure, in this case to stocks. And Goldberg said for most investors that they will stick to that stance.

“There is no alternative,” he said. “From what I see, investors are more scared, but they don’t act on them,” he said. “To me, that’s a form of complacency. It’s like waiting for a bell to ring and they’ll be able to get out before the market fills up.”

Older investors who do not need market money to meet immediate needs, including baby boomers who have done well in the equity space and remain in the market time horizon for at least several years, do not need to reduce their overall equity exposure, but should do so by reducing the composition of the stocks in the Think about ownership, said Goldberg. While they have stayed away from the meme stocks and the pandemic stocks, they have also added the value of stocks in other parts of the market like consumer staples and dividend stocks and major technology leaders.

Taking risk off the table doesn’t have to mean making major changes to the overall portfolio asset allocation plan.

Boneparth said, in his view, “taking risk off the table” can mean going from a 90% to 10% stock split to 80% to 20%.

Downshifting from “aggressive to just plain aggressive” shouldn’t make an investor jump out of his seat, he said.

Many investors make the mistake of withdrawing completely from a market, Boneparth said, and that “smart money” approach tends to be a loser. But, he said, “those are returns so far above their historical means that it really always asks, ‘When is that right?'”

Let’s not get out of hand. Let’s context to less risk, not drastic change, not even decrease, just adding, ”said Boneparth.

Jamie Murray explains why Novak Djokovic’s NBA-style bubble thought can be troublesome to drag off in tennis

Jamie Murray says quarantine for long periods is “not good for your sanity” while also acknowledging that Novak Djokovic’s proposal to implement an NBA-style bubble would be “very difficult” to replicate in tennis.

The world’s best tennis players had to self-isolate for 14 days in Melbourne and Adelaide before the Australian Open 2021.

The players were only allowed to train for a short time each day and when the sport finally got going, several players were fighting mentally and physically.

World number 1 Djokovic, who sustained an injury en route to winning a ninth Australian Open trophy, said the majority of players do not want to continue the season if it means going through multiple quarantine periods.

He also came up with the idea of ​​an NBA style bubble for tennis where all events are held in the same location.

Novak Djokovic reveals that talks about the future of the tennis season are ongoing

Doubles specialist Murray admits that he and his partner Bruno Soares aren’t sure when they’ll be returning to the ATP Tour, but says the current situation is not healthy.

“We’re not entirely sure what we’re up to, but we want to play in Acapulco and Miami, assuming they go on as planned next month,” he wrote on his BBC Sports column.

“We should have exceptions through the ATP in order to travel and take part in competitions. There is the added stress for the players of getting flights without knowing if you will test positive on arrival and then sitting in your room in quarantine for long periods of time.

“It is not a great preparation for your sanity. It’s a strange time and I don’t know how long it will go on.

“Novak Djokovic recently launched the idea of ​​an NBA-style bubble. In an ideal world, the tour would move to one country for six or seven weeks and host a variety of tournaments.

“In reality, it is obviously very difficult because the tour does not run the tournaments.

“Hopefully the world can be vaccinated and we can once again compete in a normal world with people who are free to watch us play.

“But it still feels like we’re far from it.”

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New Rap Track of the Day: Child Cash “Moncler Bubble”

With artists releasing songs at a fast, frenzied pace, it is difficult for the average hip-hop head to stay on top of things – no matter how well addressed they are. That is why we created The Ones, a daily post, to highlight the song you need to hear.

Baby money – “Moncler Bubble”

Whether it’s the casual North Face Nuptse puffer or the over-the-top Canada Goose parka best suited for a hike through a blizzard, a rapper’s winter outerwear says a lot about his personality. In Detroit’s designer-brand-obsessed rap scene, it only makes sense that Baby Money chose to rap over its “Moncler Bubble”. It’s an eye-catching coat that looks expensive at photo shoots, but is also so plush that if you fall on the icy floor while wearing it, you’ll feel like you’ve landed on a mattress. In “Moncler Bubble”, Baby Money not only boasts of his outer layer with his clever play on words – he is unfazed by the crash of his Corvette – but everything comes back to what keeps him warm in the brutal winter in the Midwest. “Moncler bubble for the times when we don’t have shit,” raps Baby Money with a suppleness perfect for appreciating the luxury of a good coat.

Check out the previousand hear new rap from Baby Money and more on ours Spotify playlist.

The rich are investing like market bubble is right here, or not less than close to

If an investor with a market share of $ 1 million or more believes that there is already a stock bubble – or one is coming soon – what is the correct answer? According to a new survey by E-Trade Financial, the answer is to keep investing in stocks with an emphasis on undervalued sectors of the market.

Only 9% of the millionaires surveyed by E-Trade believe the market is nowhere near a bubble. The rest of the wealthy investor set:

  • 16% think we are “full in a bubble”
  • 46% in “something like a bubble”
  • 29% believe the market is getting closer

However, these wealthy investors do not run away from the market or park money in cash. With bubble fears mounting mounting fears, the same investors say their risk tolerance increased significantly in the first quarter of 2021, and the majority expect stocks to end the first quarter with more gains.

The introduction of the Covid-19 vaccines, albeit slow to start, and the prospect of another even bigger stimulus package from President-elect Biden are causing investors to do what market history dictates: look ahead.

“There is broader recognition of an improving economy and evidence that the factors for higher market development are in place,” said Mike Loewengart, chief investment officer of E-Trade Financial’s capital management unit.

The survey by Morgan StanleyThe e-trade was conducted Jan. 1-7 among an online sample of 904 self-managed active investors in the US who hold at least $ 10,000 in an online brokerage account. The millionaires record, created exclusively for CNBC, consists of 188 investors with investable assets of at least $ 1 million.

The apparent contradiction in the sustained upward movement at a time of mounting bladder anxiety is not as strong as it seems. This bull market has taken all risks and market experts continue to believe that the path of least resistance is up. Although the A bullish path may require some portfolio optimization with a greater focus on undervalued sectors of the stock market.

Here are some results from the e-trade survey that show where investors are right now between risk and reward.

1. Millionaires are more bullish than the wider investing public

There’s a lot of talk right now about an overstretched market and dotcom bubble-like environment, which makes it difficult for many investors to shut down the noise. But among these wealthy investors, even as their own bubble fears mount, they are increasingly bullish and bullish than the broader investor universe. 64 percent of millionaires are bullish, up 9 percentage points from the fourth quarter of 2020 compared to 57 percent of the broader investor universe who remain bullish.

Among these investors, the percentage who said their risk tolerance increased in the first quarter rose 8 percentage points (from 16% to 24%). The majority (63%) said that it will remain at the level of the previous quarter. Only 13% of millionaires said their risk tolerance has decreased.

Wealthy investors don’t expect great returns. The largest group expects the market to grow no more than 5% this quarter. However, after the sharp rise in the markets that are already on the books, this is a safe, albeit bullish, reaction, Loewengart said. Fifty-nine percent of millionaires expect another quarterly profit in the S&P 500, with 43 percent of those seeing a profit of no more than 5 percent. Those who believe the market is due for a quarterly decline fell from 28% to 22%.

2. Further portfolio changes will be made

Even if the risk remains the mode for many, more and more investors are optimizing their portfolios. Rotation in value stocks, small-cap stocks, and depressed sectors like energy and finance is already a well-mapped phenomenon – called the “big rotation” – and these investors are no exception.

The percentage of millionaires who report making changes to the allocations in their portfolios rose 6% for the second straight quarter to almost a third (32%) overall. The percentage of millionaires who invest in cash is still very low (7%) but increased from 5% in the last quarter.

While growth stocks have outperformed in recent years, investors are taking the opportunity to move into more cyclical sectors of the market.

“Everything outside of big tech turned into better potential opportunities,” Loewengart said.

Small caps have underperformed S&P 500 since the end of 2018 according to information from CFRA.

The price growth gap between S & P 500 Growth and S & P 500 Value was at its highest level in history last August (since the mid-1970s) and is currently as large as it was in December 1999, even after a certain amount of stock rotation .

The 12-month price-performance ratio of the S&P 500 is 45% above the 20-year average. The CFRA 2021 profit increase for the S&P 500 growth component of the index is 13.3% versus 20.1% for the value group.

3. Home trading may have peaked but it is permanent

Even if millionaires are more likely to say they’re making changes to their portfolio allocations, the upside in the S&P 500 sector hasn’t changed as much as the survey suggests. This shows that names and names are given to every investor that participates in the rotation. With more cyclical games, there are still many who put their market money on the winners.

“There’s the momentum factor. People want to keep believing where they’ve seen strong returns, it will go on, but some are realizing it can’t go up forever,” Loewengart said.

While interest in financials as the sector with the greatest potential has increased slightly (3%) this quarter, a bet on a quick financial recovery, information technology and healthcare overall remain the top bets in the fall in this bull market, according to Loewengart . Healthcare (at 66%) and technology (at 53%) remain the two most popular sectors and investor interest has not declined.

Technology, for all its winnings, is hard to bet on.

“We can talk a lot about how the home trade is over and other segments will do better. However, when we see similar industry expectations, that also reflects the market tied to technology and the fact that Covid is changing the world has, “said Loewengart. “Some things are not going to be what they were before and we are going to see multiple expansion in big tech names,” he said.

He added that given recent valuations, investors should expect earnings to be more modest than the opportunity in cyclical sectors, where more stimulus and vaccine use can result in more significant valuation growth. “There is a possible change in market leadership,” said Loewengart.

4. International market opportunities are more attractive

The data shows more clearly that overseas interest is growing than that sector bets are changing significantly in the US market. This is in part because these millionaires have typically long preferred US stocks.

Millionaires are shaking their prejudices about their home country and are becoming more interested in investing outside the US. Interest rises 9 percentage points this quarter. The percentage of millionaire investors who said international markets were more attractive to them in the first quarter of 2021 rose from 27% to 36%.

“It’s definitely a big step in terms of millionaires, a significant step,” said Loewengart.

For the past three years, the S&P 500 has outperformed the international and emerging market indices developed by S&P. The last time these international markets outperformed the US large-cap index was in 2017.

While the dollar has rallied recently, its broader weakness over the past few months has been a key element of global equity performance.

“This means that the millionaire is better prepared for the opportunity,” said Loewengart.

How much of this new interest overseas is broadly based compared to China is not clear from the survey. “China could be the only G8 member to see GDP growth in 2020. This is a clear indicator that the world outside of the US, developing countries, is moving past the virus,” he said.

5. The US political risk factor has fallen sharply

If political risk and election risk were a major factor in the fourth quarter, there was a significant investor downgrade that quarter.

The end of the e-trade poll caught the Georgia runoff elections and the riot at the Capitol. After that, the market set another recordBut on the biggest question – the presidential election – millionaire investors are no longer nearly as concerned as they were last quarter.

The percentage of wealthy investors who see the new presidential administration as the greatest risk to their portfolio decreased from 50% to 30% this quarter. 26% of these investors are pessimistic about the outlook for the US economy under President-elect Biden, while 60% showed some degree of optimism, ranging from moderate (38%) to high (22%).

Market volatility, meanwhile, saw risk factors spike, from 18% of millionaires who viewed this as their biggest portfolio threat, to just over a quarter (27%).

6. Millionaires are less risky when it comes to the riskiest assets

The most recent phase of this bull market, the phase after Covid Spring 2020, was marked by a risk appetite for new offers, IPOs and SPACs, as well as an increase in new asset classes such as cryptocurrencies, including Bitcoin. Millionaires, while remaining at risk, are less interested in betting like this: