Retirement advisors in grim mood as global tensions rise

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In October 2023, Israeli airstrikes destroyed many buildings in Gaza.

Retirement advisors are feeling slightly better about the U.S. economy this month, but their view of the global system is at an all-time low.

That's according to Arizent's Retirement Advisor Confidence Outlook (RACO), a monthly survey that asks hundreds of retirement advisors about the state of their practices and the economy in general. Then it boils their answers down to an overall outlook score between minus-100 and 100.

This month, that aggregate score ticked up to minus-18, halting the steep downward slide of the past two months. In September, the overall score dropped from 1 to minus-6, and in October it plunged to minus-21.

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For now, at least, that free fall appears to have stopped. But a closer look at the data shows advisors are in a grim mood — particularly regarding the world beyond America's borders.

"Global social and political instability will have a big impact on the economy," one planner told the survey. "So this is a concern we must help clients manage in the foreseeable future."

Since Oct. 7, Israel and Hamas have been locked in a brutal war that has claimed the lives of more than 10,000 Palestinians and 1,400 Israelis so far. Meanwhile, the war in Ukraine has reached what some of the country's military officials have called a "stalemate."

By early November, these events appeared to have taken a toll on advisors' economic confidence. Sixty-four percent said they had a negative view of the global economic system — the worst result RACO has ever recorded.

"The unrest in different regions around the world impacts my outlook, as does our gridlock in D.C.," one planner told the survey.

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This alarm over global news seems to have also affected investment strategies. Allocations in foreign equities slipped to 18% in November, down from 19% in October and 25% in September.

Concern over international relations was so great that, for some advisors, it eclipsed their usual top worry: a potential recession.

"I think this will be a weak recession — it will have an effect, but not much," one wealth manager wrote. "Global tension and the threat of war is a much larger issue for me and my clients."

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In other ways, the mood seemed to improve. Clients' risk tolerance was up — after plunging to minus-30.5 in October, the score rose to minus-20.1 in November.

And in terms of their own work, advisors felt slightly more confident than they did a month ago. In November, the score measuring practice performance edged up to 19.1, up from 18.3 in October.

"People were not expecting the events of this year," one planner said. "However, they are actually more interested in looking for investment opportunities to take advantage of these current events."

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Other measurements inched upward as well. In terms of the U.S. economy — as opposed to the global one — the advisor outlook score rose to minus-7.6, up from minus-15 in October. One advisor attributed this to a "constant shifting of sentiment."

"The market outperformed our expectations leading up to August, then had a tough September and October, and is now looking better," the planner said.

For American stocks, the past few months have been a roller coaster. After a brief peak in mid-October, the S&P 500 was down 2.2% by the end of the month, the Dow Jones was down 1.4% and the Nasdaq was down 2.8%.

But so far, November has been good for U.S. equities — in the first week of the month, all three indexes enjoyed six straight days of gains.

"Many of our clients are feeling more optimistic since their investments have been showing profits," one advisor said.

Also, somewhat surprisingly, advisors gave the U.S. government higher marks in November than they did last month. The score for government policy was minus-24.40 — still deeply negative, but a good deal higher than October's record-low score of minus-35.3.

Economic Outlook - NOV 2023.png

Overall, the outlook expressed by advisors was split two ways: In terms of U.S. politics and economics, the mood stabilized — albeit at a very low level. In terms of the rest of the world, however, the view got much darker. That complex mix has left planners and their clients unsure of what to expect next.

"The Magic 8 Ball is cloudy," one advisor said.

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