There is no shortage of market prognosticators who see clouds ahead for the U.S. economy and U.S. equities, but financial advisors evidently see sunshine because they’re overwhelmingly optimistic about the U.S. outlook, according to a new survey from Ned Davis Research.

Perhaps they’re too upbeat about U.S. markets vis-à-vis sentiment indicators, says NDR, a Venice, Fla.-based investment research firm that polled 400 U.S. financial advisors in late June.

Specifically, 82% of advisors expect U.S. stocks to end the year higher. Of those advisors who believe that, the largest segment (35%) expect the S&P 500 Index to be 5% to 10% higher. Another 26% said they think the index will be more than 10% higher by year end.

Ed Clissold, chief U.S. strategist at NDR, expects the S&P 500 to likely gain 3% to 5% in this year’s second half. 

As NDR puts it in the press statement announcing this survey, the overwhelming optimism from advisors on U.S. markets is "out of sync with sentiment indicators.” The NDR Daily Trading Sentiment Composite shows that while investors have backed off from their extreme pessimism in June, they remain skeptical about the markets.
“Financial advisors clearly believe this rally has room to run, but sentiment indicators show that optimism hasn’t trickled down to their clients or the market broadly,” Clissold said. “We believe advisors need to pull expectations back just a bit. We do expect gains for the second half of this year, but they may be a bit more measured than some are hoping for.”

As for a recession, 60% of advisors don’t expect a recession until 2021 or beyond. On the flip side, 40% of respondents anticipate the U.S. will experience a recession this or next year.
“It’s interesting to see how out of sync financial advisors are from many of the wirehouses, which have become increasingly negative about U.S. stocks and the economy over the past few weeks,” said Joe Kalish, NDR’s chief global macro strategist. “Our NDR indicators and models don’t foresee a recession on the horizon.”
Amy Lubas, NDR’s advisory strategist, noted the firm has been hearing a fairly optimistic tone during recent discussions with its advisory clients. “The biggest challenge advisors have is determining when to deploy cash into the stock market,” she said.