Tom Bradley at the Steadyhand blog wrote a piece pointing out that millionaires are bearish right now according to one measure. It turns out that Spectrem Group maintains an index of investment sentiment among millionaires by doing 250 interviews each month. So, do these millionaires know something we don't know?
Bradley wasn’t endorsing this index in any way, but it got me thinking. If there is any group that may know something about investing, maybe it is millionaires. Perhaps that’s how many of them came to be millionaires. Perhaps this index has some predictive value.
The scale of the index is -100 to +100. Five years ago it was hovering around +20. However, in late 2007 it went negative. This was nearly a year before the market meltdown. This seems like a vote in favour of millionaires having useful insight into short-term stock market moves.
The next test is whether this index predicted the huge stock market rebound in 2009. Unfortunately, millionaires were bearish through all of 2008 and 2009. This index completely missed one of the biggest single-year stock market surges in history. So, it seems that millionaires aren't infallible.
This millionaire index may be useful for something, but there seems to be little evidence that it is useful for predicting stock market moves. I suspect it is more useful for financial advisors to know what sorts of investments to pitch to wealthy people.