We asked a group of financial advisors how confident they feel in the U.S. economy, whether the current rate of inflation is a reason to worry, and other pressing issues we're facing in the new year. The most surprising finding? Most financial advisors expressed concern about inflation in 2019, yet also said they have confidence in the broad economy.

Conducted by ALPS Advisors, a division of SS&C Technologies, and Smith Capital Investors, the 2018 Q4 Fixed Income survey polled 313 financial advisors who provided insights on major financial issues, including Federal Reserve actions, benchmarking strategies, and what to watch in 2019.

Other key takeaways include:

  • Inflation in focus: 75% of respondents are either 'somewhat concerned' or 'concerned' about inflation in 2019; 20% are 'not at all concerned.'
  • Economic equilibrium: 44% of respondents say their confidence level in the economy is about the same as it was this time last year; 38% are less confident; 18% are more confident.
  • Support for Fed: When asked if the Federal Reserve has moved too quickly or aggressively on interest rate hikes, 64% of advisors said 'no;' 31% said 'yes,' indicating support of the pace of the Fed's rate hikes.
  • Holding steady: 60% said they're 'not changing' their clients' fixed-income allocations for 2019; 15% are planning to up their fixed-income exposure; 12% are going to ratchet down their fixed-income investments.
  • Fixed-income rationale: Asked how they view their clients' fixed-income allocations, 18% said capital preservation; 17% - risk reduction; 9% - yield; 7% - risk-adjusted returns; 7% - portfolio insurance; 40% - all the above.
  • Short duration in favor: 51% of financial advisors currently favor short-duration fixed-income investments; 21% - investment grade; 14% - emerging markets debt; 14% - high-yield.
  • Allocation guides: Asked to rank the factors that help guide their fixed-income allocations, advisors noted:
    • Interest rate hikes 60%
    • Monetary policy 55%
    • Geopolitical and macroeconomic developments 38%
    • Economic growth 39%
    • U.S. trade tensions 24%
  • Bench strength: Asked to name their preferred benchmarking strategy, 52% said 'desired or purpose-driven outcomes;' 28% noted, 'absolute return and away from traditional benchmarking;' only 12% focus on beating a traditional benchmark.

2019 is shaping up to be very different than last year, as volatility re-enters the market and advisors are once again trending toward active management. Those who want to keep ahead of the pack will need to be able to navigate these changing conditions.

It promises to be an interesting ride!

To learn more about what respondents had to say, read the full report.


Asset Management

survey , ALPS Advisors , Smith Capital Investors , Fixed Income , Inflation

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SS&C Technologies Holdings Inc. published this content on 18 January 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 19 January 2019 07:28:00 UTC