The equity party's ending, say wealthy investors

Growing concerns over interest rates have affluent investors worried that the record bull run is almost over

The equity party's ending, say wealthy investors

With the recent US midterm elections ending in a democratic takeover of the House, some might see a power shift that could alter the markets. But a new survey suggests that high-net-worth investors are concerned about something totally different.

A new survey from E-Trade Financial, a US-based financial-services provider, has found that only 9% of self-directed investors with a minimum of US$1 million in their brokerage accounts expect stock market volatility to decline because of election results that were in line with their expectations. In contrast, 47% said volatility would stay the same, and 44% said it would rise.

When asked about their outlook on the US financial markets following the election results, 45% said it had not changed their perspective. Thirty-five per cent said they were more bullish, while 20% were more bearish.

The week after the midterms was a bumpy one for financial markets, with stocks suffering deep losses. But if the survey is right, current headlines — whether on the US political front or on the global stage — aren’t what wealthy investors are focused on. Just over half (51%) of the respondents, not mindful of short-term political risks, said they aren’t making changes to their portfolios in the wake of the elections.

“Any near-term noise is never a good idea to make wholesale changes,” Mike Loewengart, chief investment officer at E-Trade Capital Management, told CNBC. “Over longer periods of times these events are less meaningful.”

But wealthy investors, Loewengart noted, do recognize that good times always end — it’s just a question of when. Those polled pointed to economic headwinds that are dragging on stocks’ decade-long run, with the largest group (45%) seeing just one or two years’ worth of steam left in the bull market. Another 25% of the wealthy investors agreed that “the end is near.”

The survey also dove into the different sectors where wealthy investors saw the most potential after the midterm elections. A full 58% of wealthy investors placed their bets on the healthcare sector: aside from performing well so far in 2018, it’s also historically shown strong late-cycle performance. Financials were the second favourite, cited by 44% of the respondents, followed by information technology at 37%.

The other sectors cited by respondents were:

  • Consumer staples (29%)
  • Industrials (27%)
  • Consumer discretionary (24%)
  • Utilities (17%)
  • Materials (17%)
  • Communications services (15%)


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