Where wealthy Americans think the market and US economy will be at end of 2020

America’s wealthy are showing increased levels of anxiety about the economy and stock market headed into 2020, but overall sentiment from the wealthy remains baseline optimistic. Most millionaires do not expect big things, or the U.S. economy going over a cliff, in the next year, according to the results of the new CNBC Millionaire Survey.

After a recession-less decade and a stock boom for the record books in 2019, the more cautious view from millionaire investors when it comes to their money is not surprising.

The 39% of millionaires who think the economy will weaken next year represents a significant rise, of 14%, from the Spring survey, but the majority of the wealthy expect the economy to “be the same” (38%) or “get stronger” (27%).

Meanwhile, the 54% of millionaires who expect a gain of 5% or more from the S&P 500 in 2020 is down from 65% in the Spring 2019 survey.

The CNBC Millionaire Survey for the Fall 2019 was conducted in November among 700 people with investable assets of $1 million or more.

Political partisanship plays a big role in the survey responses. Among Democrats, 53% think the economy will weaken next year versus only 18% of Republicans. Democrats are far more likely (43%) to say the S&P 500 will suffer a decline; only 15% of Republicans anticipate a stock market decline.

In the November 2015 CNBC Millionaire Survey, the reaction on the economy and investing was similar in direction, but opposite in politics: Democrats felt very optimistic about the next 12 months and Republicans more negative. At the time, the Democrats were in office and Hillary Clinton was leading in the polls. Independents were in the middle in both studies.

Independents are in the middle again, but leaning towards the Democrats on economic and market issues, with 43% of those politically identifying as Independents saying the economy will be weaker. A slim majority of Independents (51%) say the S&P 500 will end the year either flat or down.

“Typically, Independents are pretty middle of the road and don’t go too far to the right or left. However, as we see some concern about the overall economy … the Independents shift more to the side of the Democrats,” said Tom Wynn, director of research at Spectrem Group, which conducts the Millionaire Survey for CNBC.

Paul West, managing partner at Carson Wealth, which represents high-net-worth investors, said the political affiliation viewpoint on the S&P 500 is not surprising. “Just look at the impeachment vote. The party lines were followed, and since each party is beating its respective drum about the direction of the economy, it’s not a surprise about the difference between Republicans and Democrats.”

West said as we continue to draw closer to the November 2020 election, his firm is of the belief that millionaires will get more and more skeptical about the economy due to election uncertainty. “The volume level around the election will continue to get louder and louder,” he said.

George Walper, president of Spectrem Group, noted that significant movements in attitudes are not typical 12 months out from a presidential election. Walper said these attitudes tend to shift more as an election nears.

“It has become increasingly difficult to understand how the economy and markets will perform in the future. Adding to that difficulty is an election year in which both parties have become hyper-polarized. To me, that looks like a perfect opportunity for volatility to strike, but volatility does not guarantee we will end the year either up or down,” said Doug Boneparth, president of wealth management firm Bone Fide Wealth.

Mitch Goldberg, president of investment advisory firm Melville, New York-based ClientFirst Strategy, believes the FOMO (fear of missing out) market will continue until sometime near end of March, at which point the stock market’s strength will come down to earnings and revenue supporting the market’s high valuation. Between the middle and end of March is when companies start making earnings preannouncements. Earnings start coming out in second week of April and expectations should be pretty high, he said.

“This entire year of positive strong returns in the S&P is based on P/E expansion, not earnings. That means investors are enthusiastic about stocks. Now corporations have to live up to the hype,” Goldberg said.

He noted that March has marked the turnaround in stocks before, notably in 2000, another time when tech stocks were dominant.

After that first quarter earnings period, the election has more power to take hold of the market direction, Goldberg said, and that could include handicapping the Federal Reserve, which may be hard pressed to do anything so close to the election. “CPI has been steadily over 2% and I expect the Fed’s preferred inflation measure to catch up. I think that presents an underappreciated risk, which is what makes it dangerous. If the CPI hits 3% and the Fed doesn’t act to raise rates, the bond vigilantes will wreak havoc on the bond market, which should spill over into the stock market and the broader economy,” he said.

The CNBC Millionaire survey polled more than 700 people with investible assets of $1 million or more, including 301 Republicans, 200 Democrats and 247 independents. Respondents had to be the financial decision-maker or share jointly in financial decision-making within the household. The survey is conducted twice a year, in the spring and fall, and has a margin of error of plus or minus 3.5 percentage points.