Family Office
Advisor confidence up in August

RIAs hopeful despite higher energy prices and rising interest
rates. Registered investment advisors (RIAs) felt slightly more
confident about the U.S. economy and the stock market in August,
according to AdvisorBenchmarking’s monthly Advisor Confidence
Index. The latest result marks the fourth straight month of
improved outlook among advisors.
Advisor confidence, as measured by AdvisorBenchmarking’s survey
of 150 independent RIAs, increased 0.79% to 123.79 in August from
123.0 in July. The index scale goes from a “very negative” 33.33
to a “very positive” 166.67; the mid point, 100, represents a
neutral outlook on markets and the economy. The index remains in
broadly neutral territory, though now with an increasingly
positive bias.
Meanwhile the Conference Board’s Consumer Confidence Index
slipped at last measure. In contrast to advisors’ more favorable
assessment of the economy in August, consumer confidence – based
on a survey of 5,000 U.S. households – saw its first decline
since April, dipping to 103.2 in July from 106.2 in June.
Fuel and the Fed
The August rise in advisor confidence came on the back of rising
current and near-term economic outlook (up 2.16% and 1.81%
respectively). When advisors were asked to rate the stock market
12 months out, however, sentiment (down 0.12) cooled. The
12-month view of the economy (down 0.91%) was even frostier.
Some advisors worry about the effect on the economy of rising
energy prices. “I find it difficult to expect the U.S. markets as
well as the U.S. economy to growth with the constant rise in
crude oil prices,” says Gary Clemmons of Baytown, Texas-based
Texas Capital Management. “The negative effect of rising crude
oil prices has yet to be reflected in the current forecast for
economic growth,” he adds.
But Curt Weil of Weil Capital Management in Palo Alto, Calif.,
says there's little need to fret about the economic effects
of rising petroleum prices. “The energy cost per dollar of
[gross domestic product] has dropped dramatically over the last
20 years,” he says.
Meanwhile Michael Sadoff of Milwaukee-based Sadoff Investment
Management sees rising interest rates as a significant threat to
economic growth. “The Federal Reserve will not stop raising
interest rates until they see economic data that the economy is
slowing down,” he says. “By that time higher short-term interest
rates will likely cause a financial crisis or a recession.”
Terry Siman of Executive Financial Services in Memphis, Tenn.,
disagrees with that assessment, however. “Despite increases in
the Fed funds rate and short-term interest rates in general, the
consumer is healthy and corporations are spending,” he says. In
the near- and mid-term future at least, Siman sees reason for
“more hope than pessimism.”
Modeled after the Consumer Confidence Index, the Advisor
Confidence Index gauges advisors' views on the economy.
Participating advisors answer four multiple-choice questions
every month reflecting their views on the economy. Three
questions gauge their views on the economy for the current time
period, the subsequent six-month period and the subsequent
12-month period. The fourth question gauges their outlook on the
stock market for the subsequent six months. AdvisorBenchmarking
is a research affiliate of Rydex Investments. –FWR
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