Next year will be a roller coaster ride for the market, according to the vast majority of advisors who participated in the InspereX Advisor Pulse survey released today.
Although most are optimistic about the eventual outcome for 2022, 95% of the 260 financial professionals who participated in the survey said they anticipate several market corrections during the year. A slim majority (54%) said they expect the equity market to be up 10% in 2022; another 28% said they expect a flat market; and 13% said the markets will be down 10% or more
“This is going to be a time when clients get queasy and that is when the clients are going to want alternatives and advisors can show their value,” Chris Mee, managing director of market-linked products, said in an interview. “I think next year is going to be challenging and last two weeks have reinforced that belief. This is when advisors earn their pay.
“While many advisors are modestly bullish on equities, they’re suggesting 2022 could be a rough ride with the possibility of numerous corrections and significant volatility,” Mee said. “In a lower-return environment, investors are generally seeking to protect their downside during periods of volatility. They aim to capture upside in the market and to avoid stalling growth, which could impact their ability to achieve their financial objectives.”
Inflation will remain a problem, but it will not end the stock market rally, the advisors said. However, the market will not show a 20% return as it did at times this year.
InspereX is a financial services firm based in Delray Beach, Fla., which provides access to fixed income markets across asset classes, as well as distribution of market-linked products. The survey participants represented more than 50 broker-dealers, banks and RIAs.
The advisors are still leery of the effects of Covid: Only 21% said they believe the impact of Covid on the market is over, while 39% are unsure, and 40% said it’s not over. When the advisors were asked what their clients are most worried about, 57% said taxes are the top concerns, 40% said market corrections and 38% said inflation.
Slightly more than half of advisors predicted a lingering low-rate environment that could threaten their clients’ retirements. The situation could force advisors to have some difficult conversations with clients, InspereX said. Fifty-one percent said they expect 10-year Treasury interest rates to hover between 1% and 2% for 2022, while 41% said rates will hover between 2% and 3%.
Forty-two percent of respondents said their retired clients are using more of their principal as income replacement due to low interest rates; while 32% said they were worried some of their clients will outlive their retirement savings unless yields rise significantly.
Almost 30% said their clients are “tired of hearing me explain they have to take more risk if they want more yield,” and 10% said they have lost clients because they “could not generate the income clients wanted within their risk tolerance,” the survey showed.