Seventy percent of RIAs said they expect the S&P 500 to grow by 3% or more in the next 12 months, according to their responses to a survey sponsored by a group including Security Benefit, Greenwald Research, and DPL Financial Partners.
This market optimism, however, is tempered by their concerns about volatility.
The survey indicated “guarded optimism that’s intriguing in its own right, coming at what many view as a pivotal inflection point for the economy,” said Mike Reidy, a national sales manager at Security Benefit, in a statement.
This is the firms’ first survey. Follow-ups will be conducted quarterly to gauge changes in advisors’ sentiments.
“Advisors are both astute observers of the financial market and important influencers on their clients’ investments and financial futures,” Reidy added.
The survey also showed that 88% of respondents believe stock market volatility will be at least as strong as it is now, if not stronger, over the next 12 months. But only 42% asserted that volatility will grow over that time.
“We see a more positive outlook from RIAs as the Fed continues to keep rates higher for longer to curb sticky inflation,” said Reidy. “And as RIAs across the industry foresee stock market volatility persisting, this may influence how they think about protecting assets for their clients who are nearing and currently in retirement.”
Security Benefit is a Kansas-based insurance provider that, with its affiliates, offers a full range of retirement and wealth-management products. Its assets under management were nearly $52 billion at the end of last year. Greenwald Research is an independent data partner, and DPL is a Louisville, Ky.-based marketplace that specializes in low-cost annuities.
Fifty-six percent of the survey respondents expect the inflation rate to grow between 2% and 2.9% over the next 12 months, which seemed in line with what Fed policy makers have thought, at least until this week’s Consumer Price Index report showed a 3.8% annual inflation rate. That might be closer to what 39% of RIAs in the survey anticipated when they said they believed inflation would remain above 3% a year from now.
Still, 58% of respondents indicated there is no or low likelihood of a recession in the next 12 months. At the same time, 30% see “moderate likelihood,” while only 12% responded that a recession was “almost certain” or had a “high” probability.
Yet 58% of them also said they are at least “somewhat concerned” about the possibility of a major equity-market downturn before year’s end. “That could contribute to continued advisor interest in investment products that offer upside potential with downside protection,” the group’s press release mused, hinting at the recent popularity of fixed-index annuities (FIAs) and structured variable annuities such as registered index-linked annuities (RILAs).
“Because there is significant worry about the potential for a market downturn, we’re seeing increased adoption of FIAs, fixed annuities and other protection-based products,” said David Lau, founder and CEO at DPL, in a statement. “We believe it’s the combination of market sentiment and the availability of fee-based protection products driving usage among RIAs who have historically lacked access to these solutions.”
The survey, conducted in February, included 201 RIAs spread across the United States. Greenwald Research conducted the survey.
The quarterly follow-up surveys will gauge how advisors are thinking about the market and the overall economy. “By posing questions about the equity market, inflation, recession risk, amongst others, we’re working to capture the current sentiment at a more micro level to help advisors and their clients with their financial planning,” said Greenwald’s founder, Matt Greenwald, in the statement.