Drivers of this Economy
March 21, 2011
While economic gauges and surveys have been showing an improvement in investor sentiment in recent months, lately, some of the numbers have been faltering.
Thus, the Fidelity Millionaire Outlook that was released last week warrants attention. More than any other investor survey, this takes a look at what could happen in the foreseeable future to the economy as a result of the tremendous wealth and influence this rarified stratum of the nation's populace controls.
Households with $1 million or more in investable assets represent only 5% of U.S. households, noted Sanjiv Mirchandani, president of Fidelity Investments' clearing business, National Financial. But, he said, "because of the amount of wealth they control, millionaires have the potential to influence financial markets as well as demand for products and services."
Indeed, the top 25% of U.S. households control 87% of all wealth in the United States; the top 5%, just over 50%; and the top 1% own 42% of all financial wealth, according to the Joint Center for Housing Studies.
So what do these wealthy people think? Will their spending and investing inspire the masses to do the same?
The wealthy seem to see a glass half full, with their immediate outlook tepid but their expectations for year-end 2011 vastly improving.
With a scale of +100 representing the most favorable outlook, zero a neutral outlook and -100 the most negative outlook, the gauge on millionaires' views on the current state of the U.S. economy remains "very weak," at -54.
However, this is a tremendous improvement from the -91 it stood at two years ago-and by the fourth quarter of 2011, their reading on the economy moves up dramatically to +37. Meaning: They expect the economy to be in full rebound by then.
Underlying millionaires' optimism is a belief that both business spending (with a future outlook of +48) and consumer spending (+41) will increase this year. Millionaires also indicate increased confidence in their outlook for the stock market (+39), the overall economy (+38) and to a lesser extent real estate (+17).
Putting aside the debate on trickle-down economics and the great wealth divide, this matters. Those who control 87% of the wealth do, in fact, drive the economy and set the tone. Which means it's up to them to pull this nation out of its lukewarm recovery.