According to the latest readings from WealthManagement.com's Advisor Sentiment Index Advisors are sensing a growing disconnect between the stock market and the overall economy.

According to the monthly survey, financial advisors are feeling significantly better about the stock market than they reported last month. Fully 60% view the current state of the stock market as positive, pushing the sentiment index to 120, or seven points higher than April's reading. (A reading of 100 equals a neutral view.) That comes after the broader market, represented by the S&P 500, returned 4.8% in May, following April's 4.2% decline.

Meanwhile, their feelings about the overall economy are noticeably dimmer, with the sentiment index falling to 101, barely in positive territory and the lowest economic reading for advisers year-to-date. Last month, sentiment about the overall economy was recorded at 103.

Only 30% of VNRs who responded to the survey consider the state of the economy positive, while almost half have a neutral view. One in four advisers see the current state of the economy in a negative light.

However, despite this, advisers are largely optimistic about the economic future. While slightly more advisers expect the economy to turn slightly negative in the next six months, nearly half see an improved economy a year from now.

Some advisers pointed to the upcoming presidential election as a driver of near-term volatility.

Investment advisers are definitely more positive about the future state of the stock market, although many say current valuations are high. Thirty-six percent of advisors surveyed see an improvement in the markets six months from now, while over half (51%) have a positive view of where the markets will be a year from now.

“Nothing seems to stop it, like inflation, interest rates and wars,” said one respondent.

The Advisor Sentiment Index is a monthly reading of registered investment advisors' views on the economy and stock market. Advisers are asked to rate their current view of the economy and 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, compared to today .

Scores are weighted and plotted on a range from 0 (extremely negative feeling) to 200 (extremely positive feeling), where 100 reflects a neutral rating.

Methodology, data collection and analysis by WealthManagement.com and Informa Engage. The methodology conforms to accepted marketing research methods, practices and procedures. Starting in January 2024, WealthManagement.com began promoting a short monthly survey to active users. Data will be collected within the last ten days of each following month, with a target of at least 100 financial advisor respondents per month. Respondents are asked their opinion of the economy and the stock market as of now, six months from now and one year from now. The responses are weighted and used to create an index tied to a neutral value of 100. Over time, the ASI will provide a sense of the direction of retail financial advisors.