In a year marked by whipsawing investor confidence, retirement savers took a bullish turn in November as their appetite for risk and equities surged, according to advisors polled in the latest Retirement Advisor Confidence Index, Financial Planning's monthly barometer of business conditions for wealth managers.
Many advisors say their clients are beginning to feel better about some of the causes of their uncertainty this year — notably the presidential election and the economic turmoil stemming from the coronavirus pandemic.
"I think there's been a more risk-on approach now with markets rebounding, us getting clarity on politics, and positive COVID vaccine news," one advisor says.
That confidence was evident in how clients viewed equities as a component of their retirement plan in November. The component of RACI that tracks assets allocated to equities posted a score of 63.3, the highest mark of the year and 12.5 points above the previous month.
RACI scores above 50 indicate an increase in investor confidence, and scores below that mark represent a decline.
Confidence in equities bottomed out in March, but has generally been rebounding since — save for a dip in October just before the presidential election, which had many investors feeling more cautious.
"Election uncertainty removed and positive outlook on vaccines led to more equity investments and higher risk tolerance," according to an advisor who took the survey.
Risk tolerance was another big mover in this month's survey, checking in at 57, surging 19.2 points from the previous month, and up a modest 3.4 points from the same period last year. The score of 57 matched the high-water mark for risk tolerance this year.
One advisor attributes that spike to factors related to the calendar.
"Higher risk tolerance and better consumer sentiment due to [the] election cycle finally over and holidays approaching," the advisor says.
Overall, the composite RACI score in November was 53.6, a 6.1-point rebound from October that equaled the highest score of the year. Investors' confidence level in their retirement plans was hovering in the low-to-mid forties from February to May, before jumping into the low fifties in the summer months and then dipping back down in October on the eve of the election.
Other asset classes saw a lift in November. Advisors report that clients were feeling good about bonds or debt-based securities, while some upped their cash positions.
The component of RACI that tracks bonds and debt-based assets soared 10.5 points from October to a mark of 62.8. That score was not only the high level of the year, but the highest score in that category since December 2013.
Advisors attribute the improvement in confidence in part to clients' evolving feelings on the pandemic.
"COVID frightened people at first," one advisor says. "But the recovery has made people generally more comfortable again."
But if some of the initial COVID-related anxiety has been priced into the market, investors are also looking ahead hopefully to a time when effective vaccines are widely distributed and administered.
"There is more confidence in the markets," one advisor says, "as it appears that the vaccines will end the pandemic in the foreseeable future."