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Affluent Americans hesitant to invest despite improving market


The recession has left a large number of America’s wealthy cautious about re-investing in the stock market and skeptical about a strong economic recovery, according to a survey by PNC Wealth Management.

Although more than half (51 per cent), up from just 25 per cent a year ago, are optimistic for the prospects of the stock market over the next six months, only six per cent characterise themselves as enthusiastic about investing.

Half (49 per cent) describe themselves as either more tentative or outright reluctant to invest, according to the sixth annual Wealth and Values Investors’ Outlook.

The survey also revealed that only one in five (20 per cent) believe the economy is showing signs of improvement, with 40 per cent projecting that progress is at least one year away.

Many affluent Americans have changed their investment behaviour, as one third (34 per cent) say they are more conservative now, while 59 per cent describe themselves as balanced or "moderate risk" investors.

"There is no doubt that the last year has taken its toll on wealthy investors," says Thomas P. Melcher, executive vice president and managing director of Hawthorn, the division of PNC Wealth Management that serves clients with USD20m or more in investable assets. "Unfortunately it often takes a severe crisis and a significant loss of capital for investors to discover their true risk tolerance."

The survey of 1,046 wealthy Americans, all of whom have at least USD500,000 in investable assets, also revealed the recession has had a negative effect on their investments, but the impact varies by how much money they have.

Nearly seven in ten (68 per cent) of those with USD500,000 to USD1m have seen a negative effect, compared to five out of ten (48 per cent) of those with USD5m or more in investable assets.

Views differ between the overall affluent group and the ultra wealthy, defined in this survey as those with more than USD5m in investable assets.

The ultra wealthy are somewhat less optimistic about the performance of the stock market the next six months, with 41 per cent very or somewhat optimistic compared to 51 per cent among all wealthy.

While 68 percent of those with USD500,000 to USD1m in assets said the recession has caused a negative effect on their investments, just 48 per cent of those with USD5m or more believe that to be the case.

The ultra wealthy are more pessimistic about economic recovery: 52 per cent (compared to 40 per cent of the total affluent sample) do not expect to see economic improvements until well into 2010.

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