Financial advisers' outlook on the state of the economy fell last month to its lowest point year-to-date, although they have a much more positive view of the near-term health of investment markets.
According to the monthly adviser opinion index, the view of the economy from registered investment advisers fell by 7.4% and recorded a “neutral” view of the current state of the economy. Less than half, or 44%, said the current state of the economy was “good” (39%) or “excellent” (5%).
They expect the economy to get worse before it gets better. Four in 10 advisers expect the economy to worsen by the first quarter of next year, while another three in 10 expect no significant change. Many cited uncertainty surrounding the upcoming presidential election, high levels of government debt and a still depressed commercial real estate sector putting downward pressure on the overall economy.
The monthly survey was conducted before the Federal Reserve cut interest rates by 50 basis points on September 18, with expectations of further rate cuts ahead. Many advisors in the monthly survey cited the need for Fed action to stimulate economic activity, reduce the rate of inflation and ease the economy into a “soft landing”.
“Federal rate cuts will help the economy as it will be cheaper to buy a home and get a car. I am also optimistic as we head into the retail season,” said one consultant surveyed.
Still other advisers pointed to high levels of debt and overvalued assets, suggesting a “hard landing” is still on the horizon.
“Stocks are currently overvalued and the Fed's rate hikes will eventually trigger a recession,” said another adviser surveyed.
Advisers are more optimistic about the long-term outlook for the economy, with almost half (45%) expecting improvement. Another 23% expect no change a year later, while 32% expect a net decline.
Continuing a trend, advisers still register a disconnect between the underlying economy and the stock market. Optimism in the state of financial markets increased by 1.6% during the month.
In the survey, 63% have a positive view of the current state of the markets. However, just three in 10 (30%) see markets improving over the next six months, with slightly more (37%) expecting a net decline – suggesting advisers see a froth in current valuations and expect uncertainty around the election to next presidential soften the market. activity.
The highest optimism prevails when advisers look ahead to the year: 42% expect markets to be “somewhat better” while 8% say they will be “much better.” Only 30% expect a market decline over the next year.
“Right now, growth is estimated at extreme levels. Future earnings will have to be perfect going forward,” said one adviser.
“Fundamental metrics are fine and positive, albeit slowing, but once a rate cut comes into effect, it should kick in,” said another.
Methodology, data collection and analysis by WealthManagement.com and Informa Engage. The methodology conforms to accepted marketing research methods, practices and procedures. Beginning 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.