Millionaire investors are adding to their mountains of cash, betting on higher interest rates and weak stock markets in 2023, according to a CNBC Millionaire Survey.

More than a third of millionaire investors, 34%, report keeping more of their money in cash, according to the survey, which surveyed households with $1 million or more in investable assets. They now hold 24% of their portfolio in cash, up significantly from the 14% they held in cash a year ago, according to the survey.

Of those surveyed, 28% said they’d bought more from fixed income, as they expected interest rates to remain high.

The findings echo a recent Capgemini survey that found global high net worth investors hold a record 34% of their portfolios in cash or cash equivalents, such as money markets, CDs and other vehicles.

“These investors are moving from growth to value, to protecting their assets,” said Elias Ghanem, global head of financial services research institute Capgemini. “For now, it’s better to be safe than sorry.”

Wealthy investors are still cautious in the stock market, but not as bearish as they were at the start of the year. While 38% of millionaire investors say that Standard & Poor’s 500 Will end the year lower, slightly more, 40%, say the market will end the year higher.

Market sentiment has improved dramatically since last year, when 69% of respondents expected a lower end of 2023 and only 22% expected the markets to end higher.

“They’re becoming more comfortable with market volatility and the fact that markets keep going up despite all the reasons they should go down,” said George Walber, president of Spectrem Group, which conducts the millionaire survey with CNBC. “A lot of people are confused rather than expecting further declines.”

However, millionaires are more downward in the overall economy. And the majority, 60%, expect the economy to be “weaker” or “much weaker” at the end of 2023.

One reason to warn them: inflation. Millionaire investors are still betting that inflation will continue for years, potentially keeping interest rates higher for longer. More than half of millionaires say inflation will not fall to the Fed’s 2% target for at least two years, while 11% say it will continue for at least five years.

There are significant generational disparities, as the stock market and inflationary economy are new phenomena for young investors. Three-quarters of millennial millionaires say inflation will drop to 2% within two years, and one in four say they will hit the 2% target within a year. This compares to 59% of older investors who say it will take more than two years.

“They haven’t seen price increases and inflation like this,” Al-Bar said.

Inflation and rising interest rates are beginning to affect the spending of the wealthy, although the changes are still small. According to the survey, more than a third of millionaire investors have cut spending on restaurants in the past six months due to inflation, and 18% have delayed buying a car. More than one in four millionaire investors say they have given less to charity due to inflation, suggesting that higher prices may also affect giving.

If inflation persists, an increasing number of millionaires, 18% of respondents, say they will cancel a trip or vacation, according to the survey. They are also borrowing less, with a third of them saying they plan to borrow less this year due to higher interest rates.

One bright spot for millionaires is bank deposits. Despite the turmoil in the regional banking system, with the failures of Silicon Valley Bank, First Republic and Signature Bank, more than two-thirds of millionaires say they are not concerned or “neutral” about the safety of their deposits in banks. Only 7% said they were “very worried”.

Only 6% of millionaires surveyed moved cash deposits from a bank due to the collapse of SVB. However, two-thirds of millionaires support Congress raising the maximum cash deposit limit as regulated by the FDIC.

“They saw the government take quick action, so they weren’t worried,” Walber said.

CNBC’s Millionaire Survey took place online in April. A total of 764 participants, with $1 million or more in investable assets, are eligible for the survey. Respondents must be the financial decision-maker or jointly participate in the financial decision-making within the household. The survey is conducted twice a year, in the spring and fall.


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