Millionaires want a little less bubbles next year

Lew Altfest, CEO of Alfest Personal Wealth Management, said: “The market is at a high and people are getting nervous. “Our customers were scared, but none of them were to the point of having to get out,” he said. “They don’t have the courage to pull out,” he said.

“You really can’t take more risk with fresh dollars,” said Doug Boneparth, president of Bone Fide Wealth. “What are you going to do? Sell all your large-cap stocks and invest in all the emerging-market stocks. Nobody does that,” he said.

Thirteen years on from the bull market, and after a big swing last year, resolved by government stimulus and the Fed printing more money, “there’s a lot of room to go up, so there’s a lot of room for that.” You can take your foot off the pedal here,” Boneparth said.

That doesn’t mean any market conditions will equate to a significant reduction in risk, but it does make sense for people to take a step back and reassess their portfolios. “It was a hell of a ride and the appetite for risk only increased in the not-so-distant past,” he added.

Even if the rich are less enthusiastic about buying stocks, they are commodity buyers, and the economy will do just fine – and corporate profits are a part of it – as long as outside of stocks, they keep buying things at a higher price, Altfest said. As people get tired of liberal spending, it’s more important to the economy and markets, he said, than when the rich ease off a bit about their risk appetite across categories. asset.

After two extremely positive years for the market in 2020 and 2021, investors are learning the information surrounding inflation and whether that means they should anticipate slower equity growth. in the near future or not.

“Those two things weigh in: how much more risk can you take?” Boneparth said.

“The ingenuity is evident in all of our meetings,” said Michael Sonnenfeldt, founder and president of Tiger 21, an investment network for the wealthy.

But for the wealthy, inflation is not an immediate threat. “If you’re worth $10 million and you’re living on $200,000 a year, even with 6% inflation, inflation won’t change your lifestyle,” Sonnenfeldt said. For the wealthy, the fear of inflation is less than the legitimate concern of the less fortunate in society about budgeting for food or buying a new car. But there’s no escaping the fact that inflation can erode the value of their assets, Sonnenfeldt said, and that makes it harder to weigh inflation against investments after a period where investors profit from such an unusual market.

“Assets are up more than inflation this year, more is it being eroded … but next year could be a double run where if inflation picks up and the market moves sideways, you’re seeing value erosion,” he said. “For this year at least, there’s no reason to panic and the custodians are growing their assets faster than inflation because the Fed has flooded the market. I don’t know a lot of people in the hedge period. Asset management doesn’t outperform inflation this year.” he added.

Tom Wynn, director of research at Spectrem Group, said: “People are still doing research on Covid and the election, and therefore, on a wait-and-see basis. “Everybody has to see what happens with inflation and taxes, and nobody really has an opinion one way or the other that things are much worse or much better,” Wynn said. ‘ said Wynn.

Altfest wouldn’t advise an investor to time the market, go all out or go all out, but he did tell investors who are making big profits from stocks like Microsoft that it’s time to sell some shares. their votes. It’s not a conversation he says always goes well.

“A lot of people are saying that the market is good to me and that is especially true for those with growth stocks,” Altfest said, adding that most of the recent gains in the S&P 500 have come from four technology companies. including Microsoft.

As investors return to core stock analysis, “what you can’t avoid is a price-to-earnings multiple, even if a company’s profits are growing at a rapid rate. It can’t be. goes up forever and PE is very high,” Altfest said.

The pressure between holding on to winners that have done well, but worries about the future trajectory of the economy and markets leave investors in what Alftest describes as “barely optimistic about the future.” share.”

Mitch Goldberg, president of investment advisory firm ClientFirst Strategy, said every time someone tells an investor to “get away from Apple and Microsoft… whoever tells them that’s wrong. But the thing is, it’s wrong.” The important thing is that it will be right in the end. But we don’t know the time.”

An investor who hasn’t changed their portfolio this year is holding more stocks just by holding steady, Goldberg said, given the recent bull market conditions for stocks and earnings. weakness in the bond market. And many investors don’t quickly rebalance after bullish periods on particular asset classes, making the process more exposed, in this case, to stocks. And that’s the stance they’ll stick with, Goldberg said for most investors.

“There is no alternative,” he said. “The way I see it, investors are smarter, but they don’t act that way,” he said. “For me, it’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 explodes.”

Older investors who don’t need market money to satisfy an immediate need, including startups that have already done well in the stock market and have at least a few years left in the market, do not need to reduce their overall stock weight, but they should, says Goldberg. While they’ve shied away from meme stocks and pandemic stocks, they’ve also pushed stock values ​​in other parts of the market, such as consumer goods and dividend stocks, and public leaders. core technology.

The removal of risk does not mean major changes to the overall portfolio asset allocation plan.

“taking the risk off the table” means going from a 90% equity-10% fixed income split to 80%-20%, Boneparth tells him.

The diversion from “uber aggressive to aggressive” shouldn’t make investors jump out of their seats, he said.

Many investors make the mistake of pulling out of the market altogether, and the “smart money” approach is often a loser, he said. But Boneparth added, “These are returns that are so much higher than their history that it really does forever raise the question, ‘When is this accurate?'”

“Don’t overdo it,” says Boneparth.