Predicting the market is a highly sought after skill. Knowing where the market is headed and being able to adjust portfolios for future movements is a valuable talent indeed. And while most people might argue that it’s near impossible, they would underestimate investment advisors’ sixth sense of the market’s direction.
For the past three years, via our Advisor Confidence Index, we’ve asked advisors for their thoughts on the economy and stock market. To celebrate the index’s three-year anniversary, we took a look at how it has compared to the stock market’s movements during that time period and discovered that advisors have correctly predicted future market movement trends about 80% of the time.
Originally created to give advisors better insight into how their market opinions compare to their peers, the Advisor Confidence Index showcases advisor sentiment on the market and the economy. All the advisors who participate in the Advisor Confidence Index rank the index as either being “very useful” or “useful,” with most (85%) saying that it puts them “in the know” regarding their counterparts’ economic opinions. Partially modeled after the Consumer Confidence Index, it captures the sentiments of 150 independent registered investment advisors (RIAs) who participate in a monthly survey about their outlook on the economy for various time periods. Participating advisors answer four multiple-choice questions, reflecting their views on the current, six-month and 12-month economic outlook and current stock market outlook-the resulting answers are then capsulated into a single index number. The change in the index’s value from the preceding month is then calculated and reported as a percent change. For instance, advisor confidence bounced back in April to 116.11 after hitting a record low in March and then decreased again to 111.55 in May.