U.S. advisors are increasingly optimistic about the economy and the stock market in the short term, but their views are tempered for the future. Optimism rose 1.7% in July, according to The WealthManagement.com, a benchmark of advisors’ views on the current and future of the U.S. economy and stock market.
But when asked how the economy would look in a year, confidence levels fell 3%.
“It’d be close to a miracle if we don’t go into a recession by the end of the year or the beginning of next year,” notes advisor Bjorn Tuypens of Platinum Grove Asset Management. “The sequester will hit the U.S. economy hard in the third quarter. In addition, the combined 150 basis point rise in mortgage rates and rise in energy prices will hit the consumer hard.”
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And even though optimism in the markets for the remainder of the year increased by 5%, most still feel a disconnect persists between the economy and the stock market. They attribute the stock market ascendance to federal fiscal stimulus programs — not necessarily to ongoing improvement in the economy or corporate earnings.
“Uncertainty is the order of the day,” says Roger Willroth of Marrs Wealth Management. “We are caught between deflation and the possibility of reflation. Positive growth would increase market valuations and PE (price to earnings) multiples, but over shooting and high inflation may be on the horizon. The very tentative nature of the current environment could cause a great deal of volatility.”
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Not all agree the fed’s stimulus programs are pumping hot air into the market.
“With Bernanke’s Taper Talk, the market heard sell bonds, but I heard buy stocks,” explains Jonathan Foster, president and CEO of Angeles Wealth Management. “The Fed will taper because they see signs of sustainable economic progress. They see all the cards, so we should bet with their hand.”