The political dramas in Washington DC have caused wealthy investors to cut risk exposures, leading to the largest drop in confidence as measured by Spectrem Group in its 13 years of tracking sentiment.

While US markets continued their bullish run in May, confidence among wealthy investors plummeted, possibly hit by political shenanigans in Washington DC and doubts on how radical the Trump administration will be in reforming taxes, Spectrem Group has reported.

According to Spectrem’s High Net Worth Insights newsletter, its Spectrem Millionaire Investor Confidence Index (SMICI®) fell 17 points from April to 3, the largest month-over-month decrease in the 13-year history of the Index, while the Spectrem Affluent Investor Confidence Index (SAICI®) declined four points to 6. It is the first time the SAICI has eclipsed the SMICI since May 2011.

The indices track changes in investment sentiment among the 17 million households in the US with more than $500,000 of investable assets, and those with $1 million or more. This month’s survey was fielded between May 19 and 23, Spectrem said in a statement.

The record-breaking drop in the SMICI was caused by the almost four in ten (39 per cent) millionaires who indicated they plan to avoid investing in the coming month, 15 percent more than in April. It is the highest percentage of millionaires declaring their intention to stay on the investing sidelines since December 2013.

Declining investor sentiment among millionaires may be a result of a turbulent month in Washington, DC that has generated significant doubt about prospects for the Trump Administration to deliver on promised substantive tax reform. More than half of investors surveyed (54 per cent) cited the political environment as the story in the news most affecting their economic outlook, dramatically greater than any other topic, the organization said.

The Trump administration remains bedevilled by allegations that the new president sought to close down an official probe into alleged links between his entourage and Russia. At one point, media and political pundits began speculating whether he would be impeached, although such claims have also been dismissed as fanciful and driven by bias and Democrat bitterness at losing in November last year.

“Even though the stock market remains at near-record high levels, millionaire investors are becoming increasingly cautious,” Spectrem President George Walper said. “This is likely due to growing concerns about the weakening political position of President Trump given recent controversies, the declining likelihood of substantive tax reform in the near-term, as well as concerns about the recently submitted proposed federal budget. Although non-millionaires also recorded a drop in confidence, the fact they are slightly more confident now than millionaires is a strong indication that we may be entering a tumultuous period for investors.”