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

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

Of survey respondents, 28% said they bought more fixed income because they expect interest rates to remain high.

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

“These investors are moving from growth to value, to protecting their assets,” said Elias Ghanem, global director of the Capgemini Research Institute for Financial Services. “Better to be safe than sorry right now.

Wealthy investors are still cautious about the stock market, but not as bearish as they were at the start of the year. While 38% of millionaire investors say they do S&P 500 end the year down, a slightly larger portion, 40%, say the market will end the year up.

This market sentiment improved significantly from last year, when 69% of survey respondents expected the end of 2023 to decline and only 22% expected markets to end higher.

“They’re becoming more comfortable with the volatility of the market and the fact that markets continue to go up despite every reason they should go down,” said George Walper, president of the Spectrem Group, which conducts CNBC’s Millionaire Survey. “A lot of people are just confused before they predict further declines.”

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

One of the reasons for their caution is inflation. Millionaire investors are still betting that inflation will persist for years, potentially keeping interest rates higher for longer. More than half of millionaires say inflation won’t fall to the Federal Reserve’s 2% target for at least two years, with 11% saying it will take at least five years.

There are big differences between generations, as the inflationary stock market and economy is a new phenomenon for younger investors. Three-quarters of millennial millionaires say inflation will drop to 2% within two years, with one in four saying they will hit the 2% target within a year. That compares with 59% of older investors who say it will take more than two years.

“They haven’t experienced rate hikes and inflation like this,” Walper said.

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

If inflation persists, a growing 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 saying they plan to borrow less this year because of higher rates.

A bright spot for millionaires are bank deposits. Despite the turmoil in the region’s banking system, which saw the collapse of Silicon Valley Bank, First Republic and Signature Bank, more than two-thirds of millionaires say they are not concerned or are “neutral” about the safety of their bank deposits. Only 7% said they were “very concerned”.

Only 6% of the surveyed millionaires moved cash deposits from the bank due to the collapse of SVB. Still, two-thirds of millionaires support Congress raising the limit on cash deposits, as regulated by the Federal Deposit Insurance Corporation.

“They saw that the government was quick to intervene, so they weren’t as concerned,” Walper said.

The CNBC Millionaire Survey was conducted online in April. A total of 764 respondents with investable assets of $1 million or more qualified for the survey. Respondents had to be a financial decision-maker or jointly participate in financial decision-making in the household. The survey is conducted twice a year, in spring and autumn.

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