Leading up to a highly contentious presidential election, financial advisor confidence in the economy slightly improved over the course of the month, even as stock market sentiment, while still elevated, has tapered a bit.
According to the September recent reading from Wealthmanagement.com’s monthly Advisor Sentiment Index, confidence in the economy has increased by three points, to 103, climbing slightly into positive territory from last month’s overall neutral reading of 100.
Digging deeper, one out of three financial advisors consider the current state of the economy to be “good” or “excellent”, while 21% consider the economy “poor” or “terrible.”
Looking forward six months, advisors are almost evenly split on whether they consider the economy to improve (33%), remain unchanged (32%) or fare worse (37%).
That picture improves when advisors were asked to look out over the next twelve months. 53% of advisors have faith the economy will improve, with only 28% suggesting a downturn.
Most advisors are looking to get past the upcoming election before making more definitive statements about the direction of the economy. Inflation is still considered a major issue among surveyed advisors, with some suggesting official readings understate the case.
Yet many advisors also mentioned delayed rate cuts from the Federal Reserve as having a negative impact on economic growth, leading to challenges and a possible recession.
Advisors have so far this year consistently had a more favorable view of the stock market than the economy. Two-thirds of advisors consider the state of the stock market to be healthy.
Like their views on the economy, they are evenly divided when predicting the health of the stock market six months out. A third of respondents see the market improving, while an equal number see no change and a third again predicting somewhat worse.
Many said they were cautious about high valuations, feeding into predictions of short-term volatility. Sentiment gets clearer with a longer horizon – here, 57% of advisors see a net improvement in the market, while only 22% see a decline.
For the Advisor Sentiment Index, registered investment advisors are asked to rate their current view of the economy and the markets, as well as their sense of the future direction of each relative to today, on a five-point scale ranging from much better to much worse, relative to today. Results are weighted and plotted on a range from 0 (extreme negative sentiment) to 200 (extreme positive sentiment), where 100 reflects an overall neutral rating.
Methodology, data collection and analysis by WealthManagement.com and Informa Engage. Methodology conforms to accepted marketing research methods, practices and procedures. Beginning in January 2024, WealthManagement.com began promoting a brief monthly survey to active users. Data will be collected within the final ten days of each month going forward, with a goal of at least 100 financial advisor respondents per month. Respondents are asked for their view on the economy and the stock markets both currently, in six months and in one year. Responses are weighted and used to create an index tied to a neutral value of 100. Over time, the ASI will provide directional sentiment of retail-facing financial advisors.