Pessimism Has Investors Making Action Plans


High-net-worth investors anticipate tax increases next year and are scouting a variety of opportunities for returns, according to a Fidelity survey.



Fidelity surveyed customers with at least $250,000 in investable assets on a range of topics including potential tax increases, sector growth and opportunities in emerging markets.

Key findings of the poll include:

Just 46% of high-net-worth investors think that the market will end the year higher than its current levels, and 30% believe it will be down from current levels.

Despite market pessimism, these high-net-worth investors still expect positive returns. In fact, when asked about their average long-term annual return, investors say 6%, versus the annualized S&P 500 return of 1% from the previous five years.  

Only one-third (34%) of investors believe the current market rally is sustainable. This lack of confidence in the current rally may be the reason why 54% of investors are only partially invested or slowly re-entering the market.

The majority (56%) of high-net-worth investors believe that politicians will postpone a decision on taxes and spending until after the 2013 presidential inauguration and when a new Congress in in place. Thirty percent believe a modest short-term compromise will be achieved.

Potential income tax increases were the most concerning for respondents (35%), with capital gains tax increases second (27%). Half of respondents said there are important steps they could take in anticipation of tax increases. The top three steps include converting retirement assets to a Roth IRA (12%), accelerating income into 2012 (12%) and deferring losses or deductions into 2013 (10%).

Forty-five percent of high-net-worth investors believe that large-cap equities offer the greatest potential upside over the next 12 months. This is followed by mid-cap equities (29%) and small-cap equities (26%).

For the next 12 months, investors’ top choice (22%) for earnings potential is the energy sector. Information technology and health care are tied for the second spot at 19%.

“Successful investors keep their eyes focused on their long-term goals, in spite of short-term turmoil,” said John Sweeney, executive vice president of Fidelity Planning and Advisory Services. “By cutting through the day-to-day noise, managing risk and looking for long-term opportunities, our high-net-worth investors are exhibiting just that kind of mindset.”

The Fidelity Investing for Income Poll was conducted September 6 via a webcast interface provided by On24. On average, 1,574 attendees responded to each question, and the majority have investable assets in excess of $250,000.