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Schwab Survey: Advisors Less Bullish on Economy, Markets

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The latest Independent Advisor Outlook Study by Charles Schwab found that advisors generally remained optimistic about prospects for the economy and markets over the near term, but the debt ceiling dramatics in Washington this summer dampened their optimism.

Of the 911 advisors (all of whom custody with Schwab) who completed the semiannual SAO survey between July 26 and Aug. 5, 28% said they thought it likely that the country woul enter another recession over the ensuing six months, while 52% thought it unlikely. However, of those RIAs who completed the survey following the July 31 passage of the bill raising the debt ceiling, 32% felt a double-dip recession was likely over the following six months. The same percentage—28%—of the 1,119 advisors surveyed in July 2010 said they thought a double-dip recession was likely in the following six months.

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The online study, conducted by Koski Research, found a similar pattern on advisors’ outlook for the overall markets: Only 37% of respondents said they were feeling bullish on the markets for the ensuing six months in the most recent polling, compared to 56% who felt bullish in January 2011.

Those who said they were feeling “bearish” in late July-early August were 22% of respondents, compared to only 10% in January 2011. Of those surveyed before the debt ceiling agreement was reached, 18% said they were bearish; afterward, that percentage rose to 27%. On more specific market measures, 58% said they expected an increase in the S&P 500, down from 77% in January of this year.

As for what will impact market performance positively, the top events would be higher corporate earnings expectations (cited by 52% of respondents) and a decrease in the jobless rate (43%), while the riskiest possible events for the markets would be an increase in the unemployment rate (57%) and a continuation of the European debt crisis (47%).

Into what investment vehicles will advisors be investing more of their clients’ money over the next six months? The top vehicles cited by respondents were:

ETFs:                          26%                                       
Alt. Investments           20%                  
Active Mutual Funds      15%                
Commodities                 13%                
Real Estate & SMAs (tie  11%

Speaking of clients, advisors reported their clients were cutting expenses and trimming discretionary spending, while 59% of advisors felt it would be “difficult” to achieve their clients’ investment goals in the current market environment over the next six months. However, 91% of respondents reported gaining new client assets over the previous six months—flat with the findings in January 2011—with the two largest sources of new client assets being wirehouse brokerage firms and do-it-yourself investors.

Finally, advisors’ expectations of which  sectors will perform best over the next six months included energy, information technology and healthcare, while the biggest gainer in advisors’ sector expectations were financials.


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