Economic Optimism Looking a Little Pale

Europe, sequestration, interest rates and that evergreen—government spending—are all part of the landscape dimming advisers’ enthusiasm for the economic outlook, a survey found.

March saw the slowest rate of growth in adviser confidence since the end of last year.

According to Penton’s Advisor Confidence Index (ACI), a monthly benchmark of financial advisers’ views on the U.S. economy and the stock market, optimism was up 6% in March—the fourth consecutive month that the overall index climbed higher, but showing a noticeable slowdown.

After a steady increase in confidence since the end of last year, advisers’ belief in the continued future improvement of the market and the economy has started to moderate, as lowered optimism over the future of the U.S. economy and the stock market has dampened advisers’ overall outlook.

Growth in the component of the index that gauges confidence in the economy in 12 months grew at a slower rate of only 4%; likewise, fewer advisers registered a positive outlook for equity markets over the next six months. That index has grown at a rate of 2.3%, its slowest rate in five months.

“Though the economy appears to be strengthening in the short run, it may be illusory over the longer term,” said ACI panelist Kevin Stockton , an adviser with Horter Investment Management. “Europe is still a major problem. Europe will slow the economy. Government spending is out of control and unconscionable, and interest rates may be heading much higher, creating even worse implications for the deficit problem.”


Many advisory panelists were concerned that the stock market has gotten away from itself, in part the result of the continued low interest rate environment.

“I am uncomfortably pleased with the results from the equity markets,” said ACI panelist Harris Nydick, an adviser with CFS Investment Advisory Services. “While the numbers are great, I am highly concerned that the markets have come too far, too fast. Watch out for falling numbers when the Fed changes its current monetary course.”

Not all panelists agreed. Many saw more fundamental improvements in the economy that they expect to last. “Reduced market volatility, as the result of establishing fiscal and tax policies, is providing a basis for improved business and consumer confidence in 2013," said Paul S. King, of King Wealth Planning.

“People are tired of miniscule returns in their bank accounts and low bond yields,” said Jon Kmett of SFE Investment Counsel. “Stocks continue to offer a superior risk adjusted return for even the most risk averse investors.”'s Advisor Confidence Index (ACI) is a benchmark with an eight-year history that gauges registered investment adviser (RIA) views on the U.S. economy and the stock market. Data is compiled from a survey of 300+ panel members that work at leading 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.