Advisors are expecting politics to be a major driver of volatility in 2017, according to the latest Eaton Vance Advisor Top-of-Mind Index (Atomix) survey. In fact, “managing volatility” emerged as advisors’ top concern, rating 114.5 on the Atomix scale.
The quarterly survey of more than 1,000 financial advisors found that 65% of advisors indicated the new presidential administration will be a major driver of volatility in 2017.
(A month into the new administration, though, volatility has remained low.)
“Advisors are telling us they are approaching 2017 and the new administration with a sense of cautious optimism,” John Moninger, managing director of retail sales at Eaton Vance, said in a statement. “Politics have moved to the front of the national discussion right now, and advisors are addressing the topic to better understand client motivations and financial planning concerns.”
According to the survey, 63% of advisors reported discussing politics with their clients in the context of investment choices. Nearly one-sixth of advisors surveyed (17%) raised the topic of politics with almost all of their clients, and 16% reported that they used political conversations to better connect with clients.
Advisors are also watching the Federal Reserve’s decisions on interest rates as a potential driver of volatility. According to the survey, 46% of advisors think the Fed could be a major driver of volatility in 2017.
Despite the expected uptick in volatility, advisors have adopted a positive attitude toward U.S. equities at the start of 2017. According to the survey, 56% of advisors are feeling bullish about the year ahead.
“Advisors see opportunity in equity markets, but are also aware of potential volatility and the macro challenges ahead,” Moninger said in a statement. “As a result, they are working to find ways to manage risk while driving strong results for their clients.”
The survey finds that advisors are poised to capitalize on the opportunities volatility presents, with 54% saying volatility should be both managed to avoid losses and harnessed to take advantage of opportunities.
However, the survey finds that their clients had a different view of volatility. Only 32% of advisors said their clients agree with this approach and 48% said their clients believe volatility only should be managed to avoid losses, according to the survey.