RIAs’ outlook for U.S. economic conditions improved following the November election, according to a report released this week by Security Benefit.
The RIA Economic Outlook Index from Security Benefit in partnership with Greenwald Research found that advisor sentiment rose to 56 (on a 0 to 100 scale), after having fallen to 53 in the third quarter of 2024. However, it was still lower than the 58 recorded in the first quarter of the year.
“Optimism around the direction of the markets in 2025 is tempered by the belief that progress on inflation will be muted,” Mike Reidy, national sales manager for the RIA channel at Security Benefit, said in a statement. “Nearly half still see at least a moderate likelihood of a recession and just over half see continued market volatility throughout the year.”
Forty percent of advisors surveyed for the report expected inflation to be at least 3% in the next 12 months, up 7 percentage points from the first quarter and matching the sentiment of December’s economic projections from the Federal Reserve.
Although RIAs’ overall sentiment has improved slightly, 48% still believe that there is a moderate or high likelihood of a recession within the year.
Reidy said that with these concerns in mind, it is important that clients and advisors prepare their portfolios for all scenarios with protection-based products.
Greenwald Research surveyed 100 RIAs from across the United States in November, each managing significant assets and directly interacting with clients.
Outlook for Market’s Performance
A third of advisors in the survey said they are not at all or not too worried about a major equity downturn in the next 12 months. Moreover, 20% believe that the S&P 500 is likely to see gains of 10% or more in that period.
As for the stock market, 54% of RIAs continue to expect stock market volatility in the next 12 months to be higher than in 2023, but less than a fifth are very concerned about the risk of a major equity market downturn.
With the election now over, the survey found that RIAs are generally maintaining their allocations, with 72% noting that they are not making any changes in their investment strategies because of the outcome. A quarter said they plan to become more aggressive with client allocations.
Prospects for Tax Overhaul Renewal
Seventy-five percent of RIAs reported that clients have asked about the expiration of the 2017 tax overhaul. Although they are divided on continued market volatility, advisors do agree on the legislation’s future, with more than three-quarters saying it is likely to be renewed before year-end.
If it is not renewed this year, however, the same number of advisors expect the economy to slow, although 47% do not believe it would affect interest rates. In response to potential nonrenewal, 65% of RIAs said they would increase their use of tax-preferred investments to help protect client assets.
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