“Keep calm and carry on” seems to be the mantra for financial advisors these days, according to the latest Eaton Vance Advisor Top of Mind Index, released Tuesday.
Although 69 percent of the 1,000 advisors surveyed for the fourth quarter report said they expect increased volatility during the next six months, only 21 percent describe themselves as anxious about the market, a significant drop from the 46 percent who said they were anxious last quarter, the survey showed.
The advisors said geopolitical issues and the U.S. political environment are the two biggest potential catalysts that will create volatility in the market. Advisors are increasingly turning their attention to politics. Ninety percent said they closely follow politics as a business practice and 68 percent said they generally make investment recommendations with politics in mind.
“I’ve never seen those numbers so high,” said John Moninger, the managing director of retail sales at Eaton Vance, a global asset manager based in Boston.
Fifty-five percent of advisors view domestic policy actions as the most important consideration for investing, followed by foreign policy/international relations. “Advisors are rebalancing clients’ portfolios and taking a little risk off the table and preparing for possible tax changes by diversifying a little more,” Moninger said.
“Politics have increasingly dominated client conversations, and many advisors are using the opportunity to discuss and better understand their clients’ motivations,” he added.
Advisors reported mixed feelings on the part of their clients. Forty-two percent categorized their clients as wary of the market, and 39 percent said their clients are optimistic.
Advisors remain bullish on U.S. equities but also favor non-U.S. opportunities. Fifty-nine percent of advisors are optimistic for the immediate future for equities but that number drops to 36 percent when looking ahead 12 months. Advisors have a bearish-to-neutral outlook for the U.S. bond markets for the quarter and for the next 12 months.
Non-U.S. equities appeared to be more appealing for advisors. Seventy-five percent of advisors predict we will see growth opportunities in emerging-market equities, and 60 percent favor international equities for growth over the next six to 12 months.
“Many advisors believe U.S. markets are fully valued,” Moninger said. “Looking outside the U.S. is an attractive option as advisors work with clients to build diversified portfolios to meet their investment objectives.”