The heated U.S. presidential campaign is cooling the sentiments of wealthy investors, according to analysis by Lake Forest, Ill.-based The Spectrem Group.
Spectrem cited worry over the combative campaign for the Republican presidential nomination, where outspoken populist Donald Trump continues to lead, and criticisms of Obama administration’s response to ISIS and recent terror attacks in the west as leading concerns among affluent and millionaire households.
Spectrem’s Affluent Investor Confidence Index, measuring households with more than $500,000 in investible assets, ended December at positive four, down three points from November and down seven points from December 2014. The Spectrem Millionaire Investor Confidence Index decreased four points last month to end the year at positive 11, down five points from December 2014.
Randy Wostratzky, Spectrem’s director of business development and marketing, said in commentary that the unpredictable political climate is driving investor doubts.
“In a month that saw the worst terrorist attacks on European soil in a decade, affluent investors indicated that news stories about terrorism, more than reports about the economy, oil prices, or the political environment were most affecting their economic outlook,” says Wostratzky. “Along with anger and revulsion, terrorist attacks raise uncertainty, and uncertainty tends to have a negative impact on the market, at least in the short term.”
Spectrem’s Affluent Household Outlook, a measure of confidence in long-term factors influencing affluent investors’ daily lives, has fallen to a 22 month low to 15.30 in December 2015, down from a February 2015 peak at 32.2 and well below the December 2016 outlook at 26.
Wostratzky said that affluent investors’ confidence was also sandbagged by the Fed’s decision to raise interest rates last month. “The concern was heightened by the impact on the markets of the federal reserve’s announcement it has raised interest rates for the first time in nearly a decade. Following the announcement, an initial gain in the market was short lived, as the Dow Jones Industrial Average dropped just over 250 points the next day, wiping out the previous gains.”
When asked in December about what they consider to be the most serious threats to achieving their financial goals, 21 percent of affluent investors cited market conditions, down from 27 percent in September. Concerns over the economic environment rose to 18 percent from 15 percent in September, and 14 percent of respondents cited the political climate, up from 10 percent in September.
Concerns over the international economic and political situation were lower in December, with 5 percent of affluent investors citing it as a factor that threatens their financial goals, down from 11 percent in September, while inflation continues to be a non-factor for affluent investors, with just 4 percent citing it as a concern.
Retirement also weighs heavy on affluent families’ financial plans, with 19 percent of respondents citing it as a factor, followed by the economic environment, 10 percent, and their household income, 6 percent.