Wealthy Investors Expect Dreary Stock Market in 2009

Yet 50% Believe They Are on Right Track for Long Term, PNC Survey Finds

The number of wealthy Americans who feel pessimistic about the stock market and real estate has nearly doubled in the past year, according to a survey by PNC Wealth Management, a member of The PNC Financial Services Group, Inc.

More than half — 53 percent — have a gloomy outlook about stock market performance in 2009, the fifth annual Wealth and Values Survey found. Only one in four (25 percent) are optimistic about the market next year.

Despite this prevailing pessimism, however, two-thirds remain confident of the long-term as 67 percent responded, “I feel I have control over my financial future.” Exactly half, 50 percent, said, “I am confident I’m on the right track” for retirement and only 15 percent said they will not meet their retirement goals.

“Markets never bottom when investors are optimistic,” said Thomas P. Melcher, executive vice president and managing director of Hawthorn, the division of PNC Wealth Management that serves clients with $20 million or more in investable assets. “These findings represent a bottoming process. The number of sellers declines as pessimism rises and it appears that many investors are sitting on the sidelines waiting for a recovery. From a contrarian viewpoint, this is a positive development.”

The Waiting Game

The survey of 1,263 wealthy Americans, all of whom had at least $500,000 in investable assets, also revealed that despite a dreary outlook on the stock market, almost two-thirds (65 percent) of the wealthy still like stocks as an investment compared to 18 percent who dislike that asset class.

“Sophisticated investors know that in the long run, valuation drives future returns and the market is cheap on virtually every measure,” Melcher said. “Investors may not be happy at the current time, but they realize the market will eventually turn and when it does they are likely to be handsomely rewarded for their perseverance.”

White House; My House; Best Bets

The fifth annual Wealth and Values Survey by PNC, which is among the nation’s top 20 wealth management firms, also revealed insights about the following issues:

Economic Concerns High

Almost two-thirds, 61 percent, of wealthy Americans are concerned about a recession and 59 percent are concerned that inflation will exceed the returns of their investment portfolios. About the same number, 62 percent, are more pessimistic in the outlook for the U.S. economy in 2009. Only one in four (24 percent), meanwhile, are optimistic about their ability to get credit at reasonable rates.

Change Is Good

Among the wealthy there was an appetite for change in the White House. The survey, taken in September, revealed that 40 percent are optimistic about the election of a new U.S. president while 26 percent were neutral and 34 percent were pessimistic.

Real Estate Worries

Fifty-seven percent are pessimistic about the outlook on the real estate market, about the same as last year (56 percent). In addition, half of those surveyed (50 percent) expect a continued decline in the value of their primary residence, almost double those (27 percent) who believe they will see an increase. One in three (33 percent) expect a drop of 5 percent or more. This outlook is the opposite of last year when 23 percent expected a decrease and 51 percent foresaw an increase in value.

Top Sectors

Asked which sectors have the best chance for gains in 2009, the wealthy are bullish on energy/utilities (66 percent compared to 61 percent last year). Technology remains second but at 51 percent (down from 59 percent). Health care is third (46 percent versus 53 percent) then financial (down to 19 percent from 29 percent).

Stocks and Mutual Funds Still Have Favor

Stock and mutual funds still comprise half of the wealthy’s investment portfolios, combining for 49.8 percent. Other assets classes include: cash, 15.4 percent; bonds, 11.9 percent; international stocks, 8.0 percent and investment real estate, 7.0 percent. Private equity (1.5 percent), Exchange traded funds (1.3 percent) and hedge funds (0.6 percent) all play significantly smaller roles in the wealthy’s portfolios.

Full press release please read here.