New York, NY—July 1, 2013 The WealthManagement.com Advisor Confidence Index (ACI), a benchmark of financial advisors’ views on the U.S. economy and the stock market, was mixed in June. While the overall index remained essentially flat, falling a mere .6 percent, the underlying indicators showed a fall in optimism in the near term while at the same time indicating more optimism over the one-year future of the stock market.
The overall index fell from the 114.8 mark registered in May to 114.08 in June. The recent swoon in the bond market that rattled equities and sent bond yields higher were reflected in advisors’ sentiment over the current state of the economy, where their level of optimism fell by 2.5 percent; yet still remains in positive territory. Yet when asked to reflect on their predictions for the economy in one year, advisors’ were more optimistic: That reading increased by two percent.
“While the economy continues to exceed many of our expectations, there are still lingering clouds, namely our debt issues as well as the eventual exit by the Fed from quantitative easing. These still have the potential to disrupt the markets, both on the stock and the bond side, in the short-term,” said Chad Carlson, with Chicago’s Balasa Dinverno Foltz wealth management firm.
The sentiment of near-term caution was echoed by Susan Morrison, an advisor with Dorsey, Wright & Associates. “I think the stock market could go into a period of consolidation for the next few months, against a backdrop of what still remains a positive longer term picture.”
At the same time, advisors were essentially flat when asked about their sentiment of the stock market in six months; that reading fell by only one percent.
The sense among advisors in the survey is that the federal reserve’s economic stimulus program has created a false lift to equity markets, and when it is perceived that they will pull the program’s back, markets will react with volatility.
Yet there is among respondents a feeling that the economic recovery is gathering steam regardless. “Consumers are become more positive. More housing starts and low rates have helped people become more focused on equities. General mood is upbeat. Hopefully slow rising in the interest rates will not change peoples’ views,” said Nicholas A. Dostal of Securities America.
|Current state of the economy: -2.5%|
|Economy in six months: -1.1%|
|Economy in twelve months: 2%|
|Markets in six months: -1%|
Some advisors, like Douglas Stone of SeaCrest Wealth Management, see higher stock market returns thanks to the perceived sensitivity of the bond market to any hint of the Federal Reserve tapering their stimulus program. “Slow growth, low inflation, high unemployment. The Fed will keep QE3 in place. Bonds yields are rising on the hint of Fed tapering, the perfect storm for higher stock market returns,” he said.
Peter Pottle, of Pottle Financial Services, hopes investors can recognize the signal from the noise. “We expect to see much more volatility in the bond and stock markets going forward. Although we are in a basic slow growth economy there are a lot of moving parts that are causing traders much angst. Investors, please, ignore this noise and look further out.,” he said.
WealthManagment.com’s ACI records the views of a panel of some 150 financial advisors who agreed to participate on a monthly basis, recording their level of confidence across four categories: confidence in the current state of the economy, confidence in the economy in both six months and twelve months, and confidence in the near-term future of the stock market.
About Advisor Confidence Index’s Methodology
The Advisor Confidence Index is a benchmark that gauges advisors’ views on the economy. The ACI captures the views of a panel of 130 financial advisors, all of whom agreed to respond to the survey. The survey asks four questions – an advisor’s view on the economy, the economy in six months, the economy in twelve months and the stock market – on a scale from most pessimistic to most optimistic.
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