Millionaire investors are expecting the S&P 500 to drop double digits in 2023, the strongest bear sentiments since the Financial Crisis of 2008, according to CNBC’s Millionaire Survey.
The survey polled 761 investors with at least $1 million in investible assets and found that 56% expect the S&P 500 will drop 10% in 2023 and almost a third are bracing for drops greater than 15%. These drops are expected to play the largest role in personal wealth loss next year, with 28% of respondents reporting the stock market as their biggest risk potential for their wealth.
“This is the most pessimistic we’ve seen this group since the financial crisis in 2008 and 2009,” according to George Walper, president of Spectrem Group that provides the survey alongside CNBC.
Next year’s losses will add to this year’s: the S&P 500 is down -19.9% YTD as of 12/19/2022.
This class of investor currently owns greater than 85% of individual stocks and their sentiment could be added pressure on already strained, volatile markets. Most millionaire investors are calculating overall investment returns of less than 4% next year, with a third anticipating negative returns, and almost half have increased their cash allocations compared to last year or are sitting on the sidelines.
It’s a reflection of their outlook for 2023 and aligns with much of the broader guidance coming from corporations: economic slowing and potential recession are in the cards for the next year. It’s taking a toll on financial advisors.
The vast majority of millionaire investors surveyed reported that they hardly discussed positioning their portfolios for inflation this year, and confidence in financial advisors dropped across the board.
“They feel that their advisors are not communicating or preparing them for how to deal with it,” Walper told CNBC. “They’re not talking to them about what all this means for their financial future.”
Hedging for Bear Markets With Managed Futures
The iMGP DBi Managed Futures Strategy ETF (DBMF) has been a strong performer and immensely popular choice for advisors and investors alike in the challenging environment of 2022. With the economic downturn and challenges ahead in 2023, DBMF could be positioned for another solid year of performance next year. At a minimum, it offers strong hedging potential for equity underperformance.
The fund seeks long-term capital appreciation by investing in some of the most liquid U.S.-based futures contracts in a strategy utilized by hedge funds and has 21.27% returns year-to-date as of 12/17/2022. It has over $1 billion in AUM and is the largest of any managed futures ETF.
DBMF allows for the diversification of portfolios across asset classes uncorrelated to traditional equities or bonds. It is an actively managed fund that uses long and short positions within the futures market on several asset classes; domestic equities, fixed income, currencies, and commodities (via its Cayman Islands subsidiary).
The fund’s position within domestically managed futures and forward contracts is determined by the Dynamic Beta Engine, which analyzes the trailing 60-day performance of CTA hedge funds and then determines a portfolio of liquid contracts that would mimic the hedge funds’ averaged performance (not the positions).
DBMF takes long positions in derivatives with exposures to asset classes, sectors, or markets that are anticipated to grow in value and takes short positions in derivatives with exposures expected to fall in value.
DBMF has management fees of 0.85% with another 0.10% in fees for interest and dividend expenses.
For more news, information, and analysis, visit the Managed Futures Channel.