America’s wealthy say Fed-induced stock rally has plenty of life left


Even as the Fed has become more concerned about economic headwinds, wealthy investors are showing a slight increase in economic confidence. Millionaire investors who gave the U.S. economy a grade of A or B in the second-quarter survey increased to 77%, up from 67% in Q1. The percentage of wealthy investors who gave the economy a C, D or F all decreased.

Though the Fed headlines clearly have influenced investors’ view of rates. The percentage of these investors who said the economy is healthy enough for more rate hikes declined from 35% in Q1 to 24% in Q2.

“We have a risk of a melt-up, not a meltdown here,” Larry Fink, CEO of the world’s biggest asset manager, BlackRock, told CNBC on Tuesday. “Despite where the markets are in equities, we have not seen money being put to work,” Fink said. “Many people thought we were going to be in a period of rising rates. We were not, and we saw huge underinvestment and people had to rush into fixed income,” he said. “We have not seen that in equities yet.”

Stocks gained 13% in the first quarter, and for chart traders that surge is a bullish sign. According to BMO, every time the S&P 500 scored a gain of 10% or more in the first quarter of a year since 1935, the market climbed 6% more on average for the rest of the year, with positive performance during 11 of the 12 times.

Loewengart said if there is more stock-buying to come, it is important to note that the data doesn’t show these wealthy investors holding expectations for huge gains. While 62% of survey respondents said stocks will rise through the end of Q2, 44% expect the rise to be limited to at most 5%. Only 14% expect a rise of 10% or more.

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