S&P 500: Crazy rich investors are ditching stocks and buying this instead

It’s been a tough year for wealthy investors. And they start to be afraid of their money.


High net worth individuals, people with investable assets of $1 million or more, have cut their exposure to stocks in 2023 by 6 percentage points to 23% – the biggest annual drop since 2008 amid a severe crisis financial, according to a new Capgemini World Wealth Report.

And what did the rich charge instead? Species. High net worth investors increased their cash by 10 percentage points – the biggest jump of any asset class – to 34%. This is the largest cash position of wealthy investors since at least 2002, according to Capgemini.

This is a significant change. This signals that wealthy investors are opting for the perceived safety of cash, especially since risk-free returns of 5% are possible in simple savings accounts. And the wealthy are willing to give up stock growth in exchange. Cash is now the largest position in their portfolios.

“Clients are more conservative in times of uncertainty, with priorities focused on preserving wealth through diversified investment strategies and looking to the future,” said James Dunlop of ANZ Australia, a bank, in the report.

High net worth people Difficult year

It’s time to break out a fiddle for the richest people in the world.

Wealth of high net worth individuals fell 3.6% in 2023 from a year earlier, Capgemini said. This is the biggest drop in the coffers of high net worth individuals in the past decade. And the fall was an even steeper cliff in North America. The wealth of high net worth individuals plunged 7.4% on the continent, which remains the richest in the world. Massive declines in tech stocks like Amazon.co.uk (AMZN), You’re here (TSLA) and Focus on video communications (ZM) were to blame.

The decline was also linked to slowing global economic growth, stubbornly high inflation and rising interest rates. Global economic growth slowed to 3.2%, half its rate of 6% in 2021.

And the rich have entrenched themselves to cling to what they have. More than two-thirds of high net worth individuals have prioritized wealth preservation as their goal by 2023.

What Crazy Rich Investors Do With Their Money

When just keeping your money is your top priority, your investments are very different from those you’re trying to amass more of. This is clearly seen in the changes that high net worth individuals made to their portfolios at the start of the year.

Wealthy investors turned to cash and moved away from S&P 500 stocks. But they didn’t stop there. They largely traded their declining tech stocks for cheaper ones, Capgemini said. It may have helped stem the pain in 2022, but it’s costing them now. The seven largest stocks in the S&P 500, mostly big tech, are driving this year’s roughly 9% rally.

Meanwhile, the wealthy have also lightened up on bonds coming in 2023 as well. This is a bit surprising, as the relative safety of bonds is usually an asset in times of economic uncertainty. But bonds had their worst year in more than two centuries in 2022, Capgemini said. “The Total Bond Index, which tracks investment-grade US bonds, fell more than 13% in 2022 … (it) had never fallen to such a degree before,” the report said.

With no bonds to hide in, the wealthy rushed for cash instead. Moreover, thanks to rising interest rates, investors can see annual returns of 5% without the risk of buying stocks or even bonds. “Rising interest rates and high inflation have made cash and cash equivalent yields more attractive, and they are less risky,” Capgemini said.

And when security is the goal, it’s hard to beat cash.

Where the rich put their money

Asset class Allocation 2023 % (each percentage point from 2022) Representative ETF Symbol 1 year % price ea. Yield
Cash, equiv. 34% (+10) JPMorgan ultra-short income (JPST) -0.2% 3.0
Stock 23% (minus 6) Vanguard Total Stock Market (VTI) 1.8% 1.5
Fixed income 15% (down 3) Vanguard Total Bond Market (NDB) -4.6% 2.7
Real estate 15% (unchanged) Vanguard Real Estate (VNQ) -17.6% 4.0
Alternatives 13% (down 1) IQ Hedge Multi-Strategy Tracking (IAQ) -1.1% 1.9
Sources: Capgemini, S&P Global Market Intelligence, IBD

Follow Matt Krantz on Twitter @mattkrantz


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