If the market is in an everything bubble, wealthy Americans are headed into 2022 saying they don’t really want much more — of anything, according to a recent CNBC survey of millionaires.

Wealthy investor sentiment is still tilted to the bullish, if moderating, with millionaires anticipating higher interest rates and tax rates in 2022. More millionaires (41%) say the economy will get stronger next year, versus 35% who say it will weaken, according to the recent CNBC Millionaire Survey. Just over half (52%) of millionaires expect the S&P 500 to finish 2022 with a gain of 5% or more.

But it’s another finding from the CNBC survey which is the most telling, and signals a downshift in enthusiasm from millionaires in the market, and an overall risk appetite that has weakened, even as the market has come through the latest omicron and Fed fears to see the S&P 500 set a new record and the Dow Jones Industrial Average remain near its highest-ever level.

Twice a year the CNBC Millionaire Survey asks investors which major asset classes they plan to increase exposure to over the next year. Investor appetite for every investment type is now lower than it was in the Spring 2021 survey. The percentage of millionaires who say they will be increasing investment declined across every single asset class, including equities, investment real estate, alternative investments, international investments, and precious metals.

For the CNBC Millionaire Survey, Spectrem Group surveyed 750 Americans with investable assets of $1 million in October and November.

“The market is high and people are nervous,” said Lew Altfest, CEO of Alfest Personal Wealth Management. “Our clients are fearful, but none of them are at the point of getting out,” he said. “They haven’t got the guts to pull out,” he said.

“You can’t really get much more risk on as far as fresh dollars,” said Doug Boneparth, president of Bone Fide Wealth. “What are you going to do? Dump all your large-caps and invest in all emerging markets stocks. No one is doing that,” he said. 

Thirteen years into a bull market run, and after a big pickup in volatility last year that was resolved with government stimulus and the Fed printing more money, “there is limited room to move up, so maybe you take your foot off the pedal here,” Boneparth said.

That doesn’t mean any market conditions that would equate to a significant de-risking, but it makes sense if people are taking a step back and reassessing their portfolios. “It’s been one hell of a ride and risk appetites have only increased in the not too distant past,” he added.

Even if the wealthy are less enthusiastic buyers of stocks, they are buyers of goods, and the economy will do well — and corporate profits as part of it — as long as outside of stocks they continue buying everything at higher prices, Altfest said. When people get tired of spending freely, he said, is more important for the economy and market than when the wealthy pull back a little on their risk appetite across asset classes.  

After two extremely positive years for the market in 2020 and 2021, investors are digesting the information around inflation and whether it means they should anticipate slower equity growth in the near term.

“Those two things set the table: how much more risk can you take?” Boneparth said.

“Skittishness is highly evident in all our meetings,” said Michael Sonnenfeldt, founder and chairman of Tiger 21, an investing network for the wealthy.

But for the wealthy, inflation is not an immediate threat. “If you’re worth $10 million and you are living off $200,000 a year, even if there is 6% inflation, the inflation won’t change your lifestyle,” Sonnenfeldt said. For the wealthy, the inflation anxiety is not equal to the legitimate concern the less fortunate in society have about food budgets or buying a new car. But there is no getting away from the fact that inflation can erode the value of their assets, Sonnenfeldt said, and that makes it harder to weigh inflation relative to investments after a period when investors have benefitted from such an extraordinary market.

“Assets went up more than inflation this year, more than it was eroding … but next year could be a double whammy, where if inflation is growing and the market is flat, you’re seeing erosion of value,” he said. “At least this year, there was no reason for panic and wealth preservers grew assets faster than rate of inflation because the Fed flooded the market. I don’t know many people in a wealth preservation phase who did not outperform inflation this year,” he added. 

“People are still digesting Covid and the election, and because of that, kind of in a wait-and-see mode,” said Tom Wynn, director of research at Spectrem Group. “People have to see what happens with inflation and taxes, and none are really taking a stand one way or another that things are much worse or better, that’s my take,” Wynn said.

Altfest would not advise an investor to time the market, be all-in or all-out, but he has told investors sitting on huge gains in stocks such as Microsoft that it is time to sell some of their holdings. That’s not a conversation he says has always gone well.

“Lots of people are saying the market has been good to me and that is particularly true of people with growth stocks,” Altfest said, adding that a majority of recent gains in the S&P 500 have come from four technology companies including Microsoft.

When investors do turn back to core stock analysis, “what you cant get away from are the price-to-earnings multiples, even with corporate profits growing at rapid pace. It can’t grow forever and the PEs are very high,” Altfest said.

The pressure between holding winners that have done so well but worrying about the future trajectory of the economy and market leaves investors in a position Alftest described as, “barely bullish about stocks.”

Mitch Goldberg, president of investment advisory firm ClientFirst Strategy, said every time someone tells an investor to “take a little off the table in Apple and Microsoft … anyone who told them that has been wrong. But the key is it will be right eventually. But we don’t know the timing.”

An investor who has made no changes to their portfolio this year is holding more equities now just by holding steady, given the recent bull market conditions for stocks and the bond market’s weak returns, said Goldberg. And many investors are not quick to rebalance after periods of appreciation in particular asset classes, compounding the process of having greater exposure, in this case, to stocks. And Goldberg said for most investors, it’s a stance they are going to stick with.

“There is no alternative,” he said. “From what I see investors are more skittish, but they are not acting on it,” he said. “To me, that is form of complacency, it’s like waiting for a bell to ring and they will be able to get out before the market tanks.” 

Older investors who don’t need market money to meet immediate needs, including baby boomers who have done well in equities and have at least several years remaining in a market time horizon, don’t need to reduce their overall stock exposure, but they should be thinking about a reduction in the composition of stocks owned, Goldberg said. While they have stayed away from the meme stocks and the pandemic stocks, they have also pushed up the value of stocks in other parts of the market, such as consumer staples and dividend stocks, and the core technology leaders.

Taking risk off the table doesn’t have to mean major shifts in an overall portfolio asset allocation plan.

Boneparth said to him, “taking risk off the table” can mean going from a 90% equity-10% fixed income split to 80%-20%.

Downshifting from “uber aggressive to just aggressive” should not make an investor jump out of their seat, he said.

Many investors make the mistake of pulling out of a market entirely and that “smart money” approach is most often a loser, he said. But Boneparth added, “These are returns so far above their historical means it really is forever creating the question, ‘When does this correct?'”

“Let’s not get out of hand. Lets get some context about having less risk, not drastic changes, not even saying decreases, just not adding,” Boneparth said.