So far, 2024 has been very different from last year for retirement advisors. Every month, they grow a little more bullish.
Retirement confidence rose once again in February, according to Arizent's
"The market is outperforming and may have already priced in a slowdown," one wealth manager told the survey. "I expect the market to be positive for 2024."
While a score of about 12 out of 100 may not sound very high, that's up from minus-21.35 in October 2023. Since then, confidence has risen for four consecutive months.
Advisors cited many reasons for this growing optimism, but one was particularly common: the Federal Reserve. In December, the Fed announced that it was most likely
"We believe that our policy rate is likely at its peak for this tightening cycle, and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year," Powell said.
Investors eager for a quick rate cut were disappointed — as evidenced by the S&P 500's 1.6% dive as Powell spoke.
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But for retirement advisors, who typically focus on the long term, this was more than enough to bolster confidence. Forty-seven percent of RACO's respondents said the Fed meeting left them more optimistic about the economy, compared to just 15% who said they felt less optimistic and 38% who said it had no impact.
"Lower rates will help everything without causing a significant increase in inflation," one planner said.
Almost across the board, measures of retirement confidence increased this month. Client risk tolerance rose from a score of 8.2 in January to 14.3 in February. Advisors' outlook on the overall economy jumped from 25.2 to 31.9.
In terms of their own practices, advisors' views were especially positive. The score measuring asset allocation increased from 4.4 to 14.2, and practice performance leapt from 27.4 to 41.5.
Even confidence in the American government, which usually sits well below zero, was way up. In February, the government policy score jumped from 5.9 to 15.6 — most likely thanks to positive reviews of the Fed.
"Since the Fed has stopped raising interest rates and indicated that there would be a decrease in rates during 2024, many of our clients have been more optimistic about their investments," one advisor said.
Only one measurement went down this month: confidence in the world economy. In February, faith in the global economic system slid from minus-40.4 to minus-47.7. But a closer look at advisors' comments showed this had less to do with the economy and more to do with the violent state of the world.
"Foreign troubles, specifically in the Middle East, are weighing on people's minds," one wealth manager said.
Another common concern was the U.S. presidential election, which many said was making their clients anxious.
"Political turmoil is a concern," one advisor said. "I try to educate that markets work well under both parties, but clients often feel the world is ending if their side isn't in charge."
But while many planners grumbled about the federal government, they showed more confidence in the Federal Reserve — and that, for the most part, meant more confidence in the economy.
"The Fed has a delicate task of reducing interest rates while ensuring that inflation does not climb higher," one advisor said. "But once they can bring down the interest rates while maintaining the inflation target, the economy should gain momentum again and the advisory practice will also do well."
