November 30, 2010

Confidence Levels Higher for Advisors, Investors and Consumers

Rydex|SGI advisor survey rose 1% in November; State Street, Conference Board indexes also saw gains

Advisors, investors and consumers expressed a boost in confidence in November, with major indexes measuring their attitudes all reporting increased levels in the last month.

In November, advisor confidence in the economy and the stock market improved moderately, rising 1% to a level of 111.75 versus 110.63 in October, according to the Rydex|SGI AdvisorBenchmarking survey released Tuesday. The advisor confidence index is a benchmark that gauges advisor views on the U.S. economy and stock market based on web surveys of registered investment advisors.

Many respondents agreed that U.S. and world economies seem to be continuing on a path of slow recovery, according to a Rydex|SGI news release.

“With the election behind us and radical legislation changes unlikely during a lame duck congress, we see this as positive for the uncertainties in the economy and market and think it bodes well for equity markets worldwide,” said Rob Siegmann of Financial Management Group, an RIA in Cincinnati, Ohio, in a statement.

Meanwhile, investor confidence also surged in November, according to State Street Global Markets, the investment research and trading arm of State Street Corp., which reported a global rise in investor confidence to a level of 97.5 versus 88.2 in October.

The index, based on actual trades rather than survey opinions, sets a neutral reading at 100, the level at which investors are neither increasing nor decreasing their allocations to risky asset

“Having remained at somewhat lackluster levels since April of this year, institutional investor confidence recovered to some degree this month, with North American and European institutions leading the way,” said Harvard

University professor Kenneth Froot, one of the survey’s developers, in a statement. “Confidence in North America remains below the neutral level of 100, but overall the numbers are indicative of an improved attitude to risk as valuations have declined from the early November highs.”

“Looking at the underlying data, we continue to see an appetite for emerging markets and growth economies, at the expense of the developed world,” added the survey’s other developer, Paul O’Connell of State Street Associates. “The confidence reading for Europe is indicative. Sovereign debt concerns have roiled domestic markets within the region and institutional investors domiciled in Europe have shown a renewed interest in deploying risk globally, despite the uncertainties at home.”

Consumer confidence also headed upward in the month. The Conference Board’s consumer confidence index, which had improved in October, increased further in November and now stands at 54.1, up from 49.9 in October. The present situation index rose to 24.0 from 23.5, and the expectations index increased to 74.2 from 67.5 last month.

“Consumer confidence is now at its highest level in five months, a welcome sign as we enter the holiday season,” said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement. “Consumers’ assessment of the current state of the economy and job market, while only slightly better than last month, suggests the economy is still expanding, albeit slowly. Expectations, the main driver of this month’s increase in confidence, are now at the highest level since May. Hopefully, the improvement in consumers’ mood will continue in the months ahead.”

Significantly, consumers were more upbeat about future job prospects. Those expecting fewer jobs in the months ahead declined to 18.8% from 22.3%, while the percentage expecting more jobs rose to 15.5% from 14.5%. The proportion of consumers expecting an increase in their incomes increased to 10.6% from 9.7%.

Read about confidence levels last summer at AdvisorOne.com.

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