Over half (56 per cent) of high net worth investors anticipate that US politicians will postpone a decision on taxes and spending until after the 2013 presidential inauguration and when a new Congress in place, a new survey shows.

On taxes, a third (35 per cent) of respondents to Fidelity Investments' poll cited potential income tax increases as their biggest concern, followed by capital gains tax increases second (27 per cent).

Only 46 per cent of HNW investors think the market will end 2012 higher than its current levels, with 30 per cent believing it will be down from current levels. Despite market pessimism, these investors are still expecting positive returns. For example, when asked about their average long-term annual return, investors say 5.8 per cent, versus the annualized S&P 500 return of 1.3 per cent from the previous five years.

Just over one-third (34 per cent) think the current market rally is sustainable. "This lack of confidence in the current rally may be the reason why 54 per cent of investors are only partially invested or slowly re-entering the market," Fidelity Investments said.

Meanwhile, chief economist at Schroders Keith Wade said today: "Unless changes to current law are enacted, fiscal tightening worth around $610 billion (4 per cent of nominal GDP) will occur in early January.

"Avoiding the full fiscal cliff of 4 per cent, which would almost certainly be enough to drive the US economy back into recession, will require both compromise and haste from politicians," he added. "We expect that the uncertainty surrounding the size, and composition, of US fiscal consolidation could dampen the appetite for risk assets, particularly equities, as we head towards the end of 2012."

Investment Opportunities

For the next 12 months, investor’s top choice (22 per cent) for earnings potential is the energy sector, with information technology and healthcare tied in second place at 19 per cent.

While one-third (32 per cent) of investors are already in the biggest emerging markets (such as Brazil, Russia, India, China), the survey found that only 12 per cent are investing in smaller emerging markets like Asia, Africa or Latin America.

Meanwhile, 45 per cent believe that large-cap equities offer the greatest potential upside over the coming year. This is followed by mid cap equities and small cap equities (29 and 26 per cent respectively.)

“Successful investors keep their eyes focused on their long-term goals, in spite of short-term turmoil,” said John Sweeney, executive vice president of Fidelity Planning and Advisory Services. “By cutting through the day-to-day noise, managing risk and looking for long-term opportunities, our HNW investors are exhibiting just that kind of mindset.”

The survey was taken during a recent Fidelity Viewpoints: Inside/Out event in San Francisco, CA. It quizzed about 1,574 HNW investors, the majority of which have over $250,000 in investible assets.