January 31, 2012

Advisor Confidence Moving in Positive Direction

This slight shift is similar to that of Spectrem Group’s affluent-investor survey and University of Michigan’s Consumer Sentiment Index

The Advisor Confidence Index rose slightly in January to 102.50. That’s up from 99.31 in December and 100.33 in November. The upward trend of this index reflects some divergence in market and economic sentiment tracked in the most recent Consumer Confidence Index and some other indicators.

In addition, 50% of advisors stated that nothing will change, regardless if a Democrat or Republican is elected president later this year, according to Rydex|SGI.

“Worldwide markets in 2012 will have great volatility because of the overwhelming disapproval of governments worldwide, but economic fundamentals can remain stable,” said Rob Siegmann (left), a financial advisor with Financial Management Group, in a press release.

As for their views on the economic, advisors’ 12-month outlook decreased 4% to 100 from 104.17.  

“Europe will continue to plague progress in the global economic recovery and fuel ongoing outsized volatility in financial markets,” said Steven Brill, a financial advisor with Spielberger Dampf Brill & Levine LLC, in a statement. “Slow growth and soft real estate values will encourage a dovish Fed response throughout 2013.”

Other Index Results

These latest Advisor Confidence Index results, released by Rydex|SGI Advisor Benchmarking on Monday, contrast with those of the January State Street (STT) Investor Confidence Index, which declined to 92.4 in January from 94.5 in December, according to a report issued Tuesday. North American institutional investors were the most risk averse, and their sentiment fell 0.1 to 89.8 from December’s revised reading of 89.9.

Also on Tuesday, the Conference Board said its Consumer Confidence Index registered at 61.1 for January, drop of 3.7 points from a revised 64.8 in December but up from 56 in November.

“Seasonal effects arising from the end-of-year holiday period contributed to larger-than-normal revisions to last month’s numbers, muddying the picture of investor risk appetite a bit,” said Harvard University professor Kenneth Froot, a co-developer of the State Street index, in a statement. “What is clear from the latest data is that institutional investors in both North America and Europe display increased caution as we embark on 2012, maintaining

equity positions that can best be described as defensive.”

Investor sentiment in Europe declined to 10.1 points to 91.6, from 101.7, as institutional investors fled core equity positions, according to State Street. Asian investors, though, added to their equity holdings, with their sentiment rising 3.3 points from 93.6 in December to 96.9 in January.

Last week, the January results of the Spectrem Group’s affluent-investor survey and the University of Michigan’s Consumer Sentiment Index both gained a point from December. The Spectrem survey also found that affluent investors moved slightly away from cash and into stocks, though the percent of investors choosing to remain out of the markets rose somewhat, as well. (Millionaire investors, however, showed far greater negativity.)

State Street says its Investor Confidence Index was developed by Froot and Paul O’Connell of State Street Associates. It is designed to measures investors’ confidence or risk appetite quantitatively by analyzing the actual buying and selling patterns of institutional investors.

“Notwithstanding this most recent rally in January, world equity prices remain about 10 percent below their April 2011 short-term high,” shared O’Connell, in a press release. “It is clear from the significant decline in the European ICI that questions about the resolution of the European sovereign debt crisis remain uppermost in investors’ minds.”

Some State Street data reveals that investors did commit new funds to emerging-markets equities in January, he says. “It remains to be seen whether these flows will translate into wider commitments across more markets as we go through the quarter,” O’Connell concluded.

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