Millionaires have a history of moving to the sidelines ahead of a presidential election, but many among America’s wealthy are now moving quickly back into the stock market, knowing that Donald Trump will be president. They told CNBC they are planning big changes to their investment portfolios and a swift change in their outlook on stock sectors.
Millionaires are pouring into financial and industrial stocks and pulling back on tech and health care, which were their favorite sectors in spring 2016, according to the latest CNBC Millionaire Survey, conducted shortly after the election in November.
Thirty-seven percent of millionaires told CNBC that the election results will cause them to make major changes to investment choices, while 40 percent of millionaires said any tax cut will lead to increased investment in stocks.
“A lot of cash sitting idle is now getting back in,” said Tom Wynn, director of research at Spectrem Group, which conducts the Millionaire Survey for CNBC. “What they are saying in this survey is that they are investing everything politically. Nothing else is triggering their investments — not age or anything else.”
Twenty percent of millionaires said the election will cause them to invest more in stocks, which Wynn said is a high number compared to historical data.
“A lot of cash sitting idle is now getting back in.”
The largest percentage of millionaires think the S&P 500 will go up between 5 percent and 10 percent in 2017, similar to millionaires’ view of market potential from the last survey, in the spring. But the percentage of millionaires who think the economy will be stronger in 2017 jumped from 30 percent in the spring to 47 percent after the election.
The rotation into the financial and industrial sectors among millionaires matches overall market enthusiasm since the election. Financials, as tracked by the SPDR Financial Select Sector ETF (XLF), is up 17 percent since Nov. 9. The Industrial Select Sector SPDR (XLI) is up 7.5 percent since the election.
The bigger change is the pulling back from tech, which has been the most popular sector among millionaires over past surveys.
Even with increased bullishness, a significant percentage of millionaires do not expect a major change in their personal rate of return compared to previous surveys, with 40 percent expecting a return between 4 percent and 6 percent. Only 27 percent of millionaires expect a return of 6 percent or greater.
A huge divide based on political stripes
Millionaire bullishness is up, but there is a huge divide in the survey data based on the political affiliation of millionaires. While the overall numbers speak to market confidence, Republican millionaires are heavily influencing the results with extreme bullishness compared to Democrats.
Sixty-percent of millionaires overall say Trump will be good for investing, up from 36 percent in the spring. But the new data includes 92 percent of Republicans and only 18 percent of Democrats.
This bifurcation is worrisome to financial advisors who work with the wealthy.
“This is a bipolar market,” said Karen Altfest, principal advisor and executive vice president of client relations at Altfest Personal Wealth Management. “There is a great danger in people taking extreme positions on either side. Market outlook shouldn’t be so extreme or depend on current events.”
Wynn said the current exuberance among millionaires is partly because the results of the election were so unexpected, and that could cause some excitement to dissipate. “People out there are expecting good times ahead. I think the economy is driven by more than just politics, and I think it is good to not invest politically,” Wynn said.
(Note on survey: The CNBC Millionaire Survey was conducted in mid-November with 750 investors and has a margin of error of +/- 3.5 percent. It is an exclusive semi-annual summary of the investment attitudes and behaviors of investors with $1 million or more of investable assets.)