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December 22, 2022 at 04:52 PM
What You Need to Know
- About half of financial advisors surveyed say the stock market will rise by at least 10% next year.
- Three-quarters of survey participants say they believe inflation has peaked.
- While they’re optimistic on stocks, advisors also believe the first half of 2023 could be bumpy for fixed income.
Nearly half of financial advisors expect the stock market to rise by at least 10% next year, including 13% who foresee it rising by 20% or more, according to the new InspereX 2023 Advisor Outlook Survey.
Another 25% expect the market to be flat, while 26% expect it to be down by at least 10%.
Regarding fixed income, 74% of advisors said they expect the inverted yield curve between 2-year and 10-year Treasurys to continue into the second quarter, including 40% who expect it to last beyond the third quarter. InspereX noted that an inverted yield curve means short-term yields are higher than long-term yields, and is often considered a signal for recession.
Three-quarters of advisors in the survey asserted that inflation has peaked.
“While many advisors are bullish on stocks in 2023 and optimistic about moderating inflation, their views on a continuation of the inverted Treasury yield curve indicate that the first half of the year could be bumpy,” InspereX’s president David Rudd said in a statement.
Red Zone Marketing conducted the survey in mid-November among 270 financial advisors from independent and regional broker-dealers, banks and RIAs.
Shocking Fixed Income Volatility
Seventy-seven percent of advisors in the study said their clients were shocked by the volatility in the fixed income market in 2022, but 78% also said their clients were not too put off to invest in fixed income right now. Indeed, 53% noted that their clients are more comfortable with volatility than they were in the past.
Fifty-nine percent of advisors said their clients are jumping at fixed income offerings with potentially higher yields. In fact, 88% maintained that today’s higher fixed income interest rates create better client conversations.
In addition, 69% of respondents said their clients will use fixed income for tax loss harvesting this year, and 53% foresaw a years-long recovery from the fixed income losses of 2022.
“Interest rates rose quickly in 2022, negatively impacting existing bond holders,” Rudd said. “But advisors are recognizing and taking advantage of numerous opportunities for their clients, including harvesting tax advantages.”
