Financial advisors are in a good mood these days about the U.S. economy, as captured by a new Arizent survey meant to assess their outlooks.
In June and July, Financial Planning's parent company conducted the first two editions of the survey, called the Retirement Advisor Confidence Outlook (RACO). The new questionnaire asks hundreds of advisors about various economic factors, as well as about their own clients' asset allocations. The goal is to provide a snapshot of how fellow advisors will use their perceptions of the economic landscape to guide choices for their clients.
It's a complicated survey, but its main result is simple: a score between minus-100 and 100, measuring wealth managers' confidence in the economy. As one might expect, negative numbers indicate a negative outlook, while positive ones reflect optimism. A score of zero is neutral.
This month, advisor confidence was still in the negative, but significantly less so than last month. The overall outlook score for July was minus-5.08, up 8.6 points from June's score of minus-13.7. This improving attitude was reflected in several wealth managers' comments.
"Previously, we were concerned about the possibility of a damaging recession coming later this year, or early next year, but those fears have seemed to have dissipated," one advisor wrote.
The uptick in confidence was driven by several factors. For one, advisors reported that their clients' risk tolerance had risen significantly, from minus-11 in June to 1.8 in July.
Other indicators went from negative to positive as well. Wealth managers' views of the overall economy, on average, jumped from minus-9 in June to 7.6 in July.
In general, the numbers appeared to indicate a cautious but growing optimism about the state of the economy, particularly with regard to the stock market. And with good reason — the
"I feel the market is tilting back up," one financial planner said. "I am a little nervous with the Fed and their interest rates, but the market doesn't seem to care."
That confidence was also clear from how advisors managed their clients' funds. Almost half of the respondents — 43.2% — said they expected to increase client investments in U.S. equities — more than for any other asset. Only 9.9% expected to decrease their allocations.
"We have seen certain stocks hit all-time highs and are starting to diversify them into a global asset allocation," one wealth manager said. "We think that international and domestic mid/small caps are well positioned for a good end of the year."
In other areas, advisors were far less optimistic. Wealth managers' views of government policy remained deeply negative, shifting downward from minus-25 in June to minus-29.5 in July. And their outlook on the global economic system was even worse, hovering around minus-46 for the past two months.
"Biden economics is destroying the economy and country," one planner wrote.
Inflation also remained a major concern. The skyrocketing prices that marred 2022 have cooled in recent months, with the
"Continued uncertainty about interest rate policy and domestic legislation has many clients still a bit on edge, making it challenging to lean into a resumed bull market," one wealth manager said.
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But there was one other topic about which advisors were resoundingly optimistic: their own firms. The score measuring practice performance jumped to 29.3 in July, up from an already-positive 17 in June.
How did wealth managers keep portfolios rising, even as the Fed and other policymakers alarmed their clients? In some cases, advisors said the key was to tune out the noise.
"We keep clients and prospective clients educated and ask them how they are feeling," one planner said. "Suggesting they stop watching the news."
