Adviser Confidence Index Spiked in February

Penton’s Advisor Confidence Index (ACI), which measures advisers’ views on the economy and the stock market, rose by 8.4% in February.

Penton’s ACI ended the month at 109.7, its highest level since April 2012.  The monthly benchmark has an eight-year history that gauges registered investment adviser (RIA) views on the U. S economy and the stock market.

February was the third consecutive month the index rose since suffering an 11% decline in November, reflecting uncertainty surrounding the election and the resolution of the fiscal cliff, according to ACI panelist William Green of GL Capital Partners.

Since then, markets have climbed 10%, and adviser confidence has rebounded. “Clearly, the U.S. economy is mending,” Green says. “Home sales, employment and confidence all look stronger. Expect a few bumps or flare ups along the way, but the U.S. economy is forming a positive base. My outlook for 2013 and 2014 remains quite positive.”

All four components of the ACI experienced an increase in confidence over the previous month:

  • Current economic outlook  + 5.2%
  • Six-month economic outlook  + 7.0%
  • 12-month economic outlook  + 18.0%
  • Stock market outlook  + 4.3%

Survey participants are optimistic about the near-term future of the economy, but many think the recent market boom is being fueled more by federal stimulus spending than economic fundamentals. And while the near term may look positive, dangers lurk further out.

“As long as the Fed is artificially suppressing interest rates and Treasury rates have seemed to hit bottom, money will flow to equities as it searches for yield,” says ACI panelist Rick Horton of WealthPlan Advisors. “Once governments start down the road of printing money, they are like an addict and have a hard time giving it up. When the Fed announces that they no longer will suppress rates, then we should see a bubble of some sort in both the bond and equity markets. Probably won’t happen for twenty four to thirty six months.”

ACI data is compiled from a survey 300+ panel members that work at RIA firms who are prequalified for their industry experience and assets under management. The survey asks advisers for their views on the outlook for the economy now, in six months, in 12 months, and on the stock market.