In the weeks leading up to the Nov. 5 election that would return Donald Trump to office, financial advisers' sentiments about the economy and stock market rose, nearly matching year-to-date highs, according to Wealthmanagement.com's Monthly Councilor Sentiment Index.
Sentiment on the economy climbed seven points higher to 110, indicating a broadly positive outlook on the health of the labor market, business activity and other economic drivers. (A reading of 100 equals a completely neutral outlook.) The level of positive sentiment in the economy, while still more muted than sentiment around the stock market, has not been higher since March of this year.
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Almost half (45%) of councilors surveyed said the economy was “good” or “excellent”, with just 19% taking the opposite view. (37% were neutral.)
Interestingly, given the sentiment poll recorded before the outcome of the last election was known, more advisers predicted that the health of the economy would improve over the coming year. Over half (52%) believe they will have a positive view of the economy by this time next year, compared with one in four (26%) who predict a more pessimistic view.
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When asked to elaborate on their views, advisers appeared to base their answer in part on the trajectory of inflation. Many are worried about a re-acceleration, while others are more optimistic about its control. While the recent turn to lower interest rates is seen as a stimulus, ongoing cost-of-living pressures (eg food and energy prices) continue to strain consumers.
Advisers pointed to persistent government deficits and rising debt as warning signs that muted their optimism about the economy.
Confidence in capital markets also increased during the month, increasing by three points to 121. The majority of respondents (70%) consider the current state of the stock market to be positive. Only 6% expressed a negative feeling.
This reflects a consistently positive outlook on the current state of the markets among advisors held throughout most of the past year, with only a small dip over the summer. While the S&P 500 was flat through most of October, the broad equity index rose 25% year-to-date leading into the November election.
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However, advisors may be starting to feel a bit of froth in the markets.
Looking six months ahead, respondents are split: 34% expect an improvement in the markets, while 29% expect no change and 37% expect a decline. They are more optimistic when looking ahead 12 months, with 56% expecting an improvement.
Stock market resilience and high valuations fuel the debate. Advisors predict increased reliance on earnings for future performance, with warnings of overvaluation and potential corrections in 2025.
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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.