Super-rich Americans are giving up on the stock market, holding historic levels of cash — here's why and what they're plowing their wealth into

Ultra-high net worth individuals and billionaires seem to be following a similar pattern. Warren Buffett’s Berkshire Hathaway, for instance, added $2 billion to its cash reserve in the first quarter of 2023, bringing its cash balance to $130 billion.

By comparison, wealthy investors had just 23% of their net assets in publicly traded stocks. That’s the lowest level of stock exposure in 21 years, according to the report. Rich Americans seem to have given up on the stock market, even as some stocks rebound.

The retreat of the ultra-wealthy from the stock market could offer some early warning for retail investors.

Super-rich are in ‘wealth preservation’ mode

“Wealthy investors are still in wealth preservation mode,” CNBC wealth editor Robert Frank said in a recent interview on the channel while dissecting Capgemini’s report. More than two-thirds of investors surveyed said preserving their capital was a top priority right now.

Rampant inflation and rising interest rates have made stocks less attractive. Meanwhile, cash and cash equivalents can generate better-than-anticipated returns. A two-year U.S. government treasury bond currently offers a yield of around 4.9%.

By comparison, the S&P 500 currently offers an earnings yield (inverted price-to-earnings ratio) of 4%.

Given their higher level of volatility and risk, stocks are only an attractive investment if they offer a significantly better return than safer options like U.S. government bonds.

With returns on very low-risk investments so elevated, wealthy investors may be seeing better alternatives elsewhere.

Better alternatives

The latest UBS Global Family Office Report, which surveys families with over $100 million in investable assets, also tells the story of investors looking at alternative assets and fixed-income securities.