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Affluent investors turn bearish on tax, reform worries

NEW YORK (Reuters) - Affluent investors turned bearish in December as their attention moved from the economy to concerns over health reform and fears the wealthy may be asked to pay more taxes.

The Spectrem Group’s affluent investor confidence index, which measures sentiment in households with more than $500,000 in investable assets, fell 5 points to -15.

Spectrem says the drop represents a shift into a “mildly bearish” range, after the index entered a neutral range the previous month.

“It really represents what is happening in Washington, so a combination of the healthcare issues in the fourth quarter and potential tax issues for the wealthy,” said George Walper, president of Spectrem Group.

“They’re saying that they are uncomfortable with what their elected officials are doing,” he said.

In response to an open-ended question about the most serious threat to their finances, 22 percent cited the political climate, up from 16 percent the previous month.

The U.S. Senate approved President Barack Obama’s landmark healthcare overhaul earlier this month, which will extend new coverage for tens of millions of uninsured Americans. Critics say the measures are expensive and heavy-handed.

Talk of increased tax on the wealthy, as well as failed moves to stop the repeal of a tax on wealthy estates in the United States, has also ruffled wealthy investors.

Confidence among affluent investors was hit hard in 2008 and early 2009 as a slump in asset prices eroded their wealth. A year ago the affluent investor index fell below 30.

Sentiment has shown some improvement recently along with a 60 percent rally in the stock market.

Among other concerns cited by the affluent, 18 percent said the economy was the biggest threat, 12 percent pointed to unemployment and only 6 percent highlighted conditions in financial markets.,

Spectrem, a Chicago-based consultancy, says the index is in neutral territory when it is in a range of -10 to 10. A reading above that is bullish, while a reading below it is bearish.

Spectrem’s millionaire investor confidence index, a subset of the first index that measures sentiment in households with over $1 million in investable assets, fell 6 point to -10 after tending higher for much of the second half of the year.

Reporting by Edward Krudy; Editing by Andrew Hay

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