Financial advisers based in the US expect a slight upward trend in market volatility over the next six months and cited geopolitical issues and the political environment in their home market as the two biggest potential catalysts, according to a new survey released by asset manager Eaton Vance.
The Q4 2017 Eaton Vance Adviser Top-of-Mind Index (ATOMIX) survey of 1,000 financial advisers found that more than two-third (69%) of financial advisers expect surge in volatility in the coming six months.
However anxiety levels appear to be dwindling as only 21% of the respondents described themselves as anxious, as against 46% in the previous quarter.
Though anxiety level declined, advisers’ concerns about managing volatility, generating income, growing capital and taxes all jumped on the ATOMIX, with volatility ranking first at 118.9, followed closely by income at 117.9.
Advisers are increasingly turning their attention to politics. Ninety percent of the respondents said they closely follow politics as a business practice and 68% said they generally make investment recommendations with politics in mind.
Eaton Vance managing director of retail sales John Moninger said: “Politics have increasingly dominated client conversations, and many advisers are using the opportunity to discuss and better understand their clients’ motivations. Advisers are working with clients to prepare for tax reform in addition to adjusting allocations in anticipation of tighter monetary policy.”
Forty-two percent of the respondents said their clients are wary about the market, while 39% said their clients are optimistic.
“Advisers are reacting to the market’s slow grind higher, which has many skeptics wondering if a cliff lies ahead,” Moninger added. “Prolonged uncertainty around policy implementation, tax reform and future interest-rate hikes has created a sense of uneasiness even during a period of steady economic growth.”
Majority of the advisers (59%) said they have a bullish outlook for US equities, but are less confident when looking ahead 12 months.
Non-US equities continue to charm US as 70% of the respondents said they hope to see growth opportunities in emerging-market equities. International (non-U.S.) equities were favoured for growth over the next 6-12 months by 60% of the respondents.
“Many advisers believe U.S. markets are fully valued. Looking outside the U.S. is an attractive option as advisers work with clients to build diversified portfolios to meet their investment objectives,” Moninger said.
The study also found that responsible investing continues to gain traction with advisers as 84% of the advisers said their clients have at least some interest in responsible investing options. However, they believe responsible investing has a long way to go before it becomes mainstream.