Advisor optimism in the stock market and the economy both took notable downturns in February.
According to Wealthmanagement.com’s WMIQ Advisor Sentiment Index, a monthly survey of registered investment advisors, financial advisors’ outlook on the economy and the equity markets took notable dives, each falling close to a 12-month low.
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Advisor optimism in the markets fell almost 10% over the month to an index reading of 114. While that’s still in positive territory (a reading of 100 reflects a neutral view), it is a whisp away from its 12-month low reached in April 2024.
And their expectations turn even more pessimistic over the next several months: Only 31% of advisors expect the market to be higher in six months, while 44% see further deterioration. That sentiment flips when advisors look out 12 months; 31% see a decline, while half see improvements.
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The short-term decline in market sentiment bucks the positive trend sparked months ago when the much-noted “Trump bump” saw markets go higher based on the anticipation of lower regulations, taxes and pro-business policies.
More recently, Trump’s tariff stance, inflation fears and unpredictable geopolitical situations have weighed on markets, down almost 4% year-to-date and 8% from its 52-week high reached last month, as reflected in the S&P 500 index.
Of course, many advisors say equity valuations were frothy to begin with and need a pullback to clarify proper pricing and valuations. Half of advisors (51%) expect market sentiment to turn positive over the next 12 months.
Meanwhile, less than half of advisors (44%) feel optimistic about the current state of the economy. When asked about the economy over the next six months, almost half (47%) expect further erosion in sentiment. Advisors continue to brace for more economic pain.
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Many advisors said inflation remains stubbornly high, and some fear it will persist due to tariffs, government spending, and monetary policy.
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“I think the president is doing things that will help the stock market in the long term, but there appears to be cracks in the economy,” wrote a survey respondent. “Once there is additional clarity regarding the Trump administration’s economic, regulatory and tax policies, it should be constructive for the … economy and capital markets.”
Methodology, data collection and analysis by WealthManagement.com and Informa Engage. Methodology conforms to accepted marketing research methods, practices and procedures. Beginning in January 2024, WealthManagement.com began promoting a brief monthly survey to active users. Data will be collected within the final 10 days of each month going forward, with a goal of at least 100 financial advisor respondents per month. Respondents are asked for their view on the economy and the stock markets both currently, in six months and in one year. Responses are weighted and used to create an index tied to a neutral value of 100. Over time, the ASI will provide directional sentiment of retail-facing financial advisors.
