The wealthy are investing like market bubble is here, or at least

If an investor with $1 million or more in the market thinks that a stock bubble is already here — or soon enough one will be coming — what is the correct response? According to a new survey from E-Trade Financial, the answer is to keep investing in stocks, with more emphasis on undervalued sectors of the market.

Only 9% of millionaires surveyed by E-Trade think the market is nowhere near a bubble. The rest of the affluent investor set:

• 16% think we’re “fully in a bubble”
• 46% in “somewhat of a bubble”
• 29% think the market is approaching one

Yet these affluent investors are not running from the market, or parking money in cash. In fact, amid rising bubble fears these same investors say their risk tolerance has increased, significantly, in the first quarter of 2021, and the majority expect stocks to end Q1 with more gains.

The rollout of the Covid-19 vaccines, even if off to a slow start, and the prospect of another even larger stimulus package from President-elect Biden, has investors doing what market history says they should do: look ahead.

“There is a broader recognition of an economy that is improving and signs that the factors are in place for the market to move higher,” said Mike Loewengart, chief investment officer at E-Trade Financial’s capital management unit.

The survey from Morgan Stanley‘s E-Trade was conducted from January 1 to January 7 among an online U.S. sample of 904 self-directed active investors who manage at least $10,000 in an online brokerage account. The millionaire data set broken out exclusively for CNBC is comprised of 188 investors with $1 million or more of investable assets.

The seeming contradiction in the continued bullishness at a time of rising bubble fears is not as stark as it seems. This bull market has defied every risk thrown at it and market experts continue to believe the path of least resistance is up. Though the bullish path may require some portfolio tuning-up with greater focus on undervalued sectors of the stock market.

Here are a few findings from the E-Trade survey that speak to where the investor mindset is right now amid the push and pull between risk and reward.

1. Millionaires are more bullish that the broader investing public

There is a lot of focus and chatter right now about an overextended market and a dotcom bubble-like environment, making it hard to tune out the noise for many investors. But among these affluent investors, even with their own bubble fears rising, they are increasingly bullish and more bullish than the broader investor universe. Sixty-four percent of millionaires are bullish, and that is up 9 percentage points from Q4 2020, and that compares to 57% of the broader investor universe that remains bullish.

Among these investors, the percentage that said their risk tolerance has increased in Q1 went up by 8 percent points (from 16% to 24%). The majority (63%) said it remains at the same level as last quarter. Only 13% of millionaires said their risk tolerance has declined.

Wealthy…