Last month's
That data is from Arizent's
In October, that score reached its lowest point in RACO's five-month history: minus-21.
"The economy is going backwards, and people are very concerned and are more conservative in their investments," one advisor told the survey.
The new score accelerates a downturn that began last month. From June to August,
The plunge in confidence was partly driven by a steep drop in clients' risk tolerance, which fell from minus-7.3 in September to minus-30.5.
"Clients nearing retirement are nervous," one planner said, citing "extreme volatility," inflation and a "looming recession."
Even more than those factors, wealth managers blamed policymakers in Washington. Many bemoaned the high interest rates imposed by the Federal Reserve — although the Fed paused its rate hikes last month — and, even more vehemently, the recent battles in Congress.
"The somewhat radical political wars and rising interest rates are encouraging my clients to stay in cash and certificates of deposit more than usual," one advisor said.
Last month, the House of Representatives came within hours of a
"McCarthy lost his job today," one planner wrote. "More chaos."
This distaste for the drama in D.C. was reflected in RACO. The score measuring advisors' faith in government policy slipped from minus-13.9 in September to -35.3 this month. And their view of the overall U.S. economy took a sharp dive, from 12.2 last month to minus-15 in October.
"Between the overly hawkish Fed and the extremely negative media coverage, it's hard to keep clients in their proper long-term allocations," one advisor wrote.
It's worth noting that RACO gathered these responses before the recent violence in Israel, which began on Oct. 7 and has already claimed more than 2,000 lives. That bloodshed will almost certainly add to wealth managers' sense of global instability, but it is not reflected in October's data.
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Even before that news broke, however, advisors' view of the world economy was already grim. Confidence in the global economic system dropped from a score of minus-50.9 last month to minus-56.1 in October.
This pessimism also showed up in the ways wealth managers planned to invest their clients' assets. Forty-two percent said they planned to invest more in cash, up from 31% last month. And enthusiasm for stocks fell slightly, with 29% planning to invest more in domestic equities, down from 31% last month. Meanwhile, 19% planned to invest more in foreign equities, down from 25% in September.
Overall, the RACO score measuring asset allocation slipped downward from minus-2.4 last month to minus-9.5 in October.
On the other hand, advisors continued to give their own practices a positive rating. The overall score for practice performance was 18.3 — though that marked a drop from last month's score of 26.2.
In general, most wealth managers were predicting a downturn. Almost 60% said they were "highly" or "moderately" concerned about a potential recession, and 42.2% expected it to arrive in the first half of 2024. Twenty percent thought it was already here.
Some blamed this malaise on the news media, citing a "constant barrage of negative news." Others saw the "chaos" in Washington as a legitimate cause for concern. Either way, clients were in a nervous mood, and that anxiety was spreading to their advisors.
"I have highly engaged and disciplined investors asking questions about their investment strategy," one planner wrote. "For me, that is a sign of bad times ahead."
