A majority of financial advisors reported positive but modest expectations for equity market returns in 2021, according to a survey released Thursday by Incapital.
Forty-nine percent of advisors said equity markets would rise between 5% and 10% this year, and 25% forecast returns of 0% to 5%, well below those of last year.
Sixteen percent of advisors were more bullish, expecting 2021 equity returns up 10% to 15% and 2% forecasting gains of up to 20% or more. Only 8% said they expected a down market this year.
Incapital’s survey was conducted online via Qualtrics by Red Zone Marketing between Dec. 8 and Dec. 14 among 396 financial professionals from more than 50 broker-dealers and RIAs.
The vast majority of advisors surveyed foresaw the possibility for multiple equity market corrections in 2021.
Among other findings, 93% said value investing could continue its comeback this year. In addition, 57% forecast rates on the 10-year Treasury to come in at 1% to 2%, while 38% said between 0% and 1%, and 5% said above 2%.
“Given the enormous amount of uncertainty and hardship from COVID-19 and other factors in 2020, it looks like advisors expect the equity market to slow down and catch its breath in 2021,” Chris Mee, Incapital’s head of wealth management solutions distribution, said in a statement. “If the possibility of multiple corrections comes true, it could be a year of more pain than gain in equities.”
In this environment, risk management is essential for investors to stay invested to capture whatever gains may come, Mee said.
The Pandemic’s Effect on Advisor Business
Sixty-nine percent of advisors reported that their revenue in 2020 was on par with that of 2019, while 25% reported an increase. Only 6% said their revenue had dropped.
Advisors’ business picked up as the difficult year progressed. Asked in June whether they expected to serve more households in 2020, 38% said yes; by September that number had climbed to 47%, and by December it was up to 52%.
Of those that expected to serve more clients, 77% said they had added six or more new households, including 47% who said they had added 10 or more.
Three in 10 advisors said they received more referrals in 2020 than in 2019, while half received about the same and 1 in 5 received fewer referrals.