Retirement confidence appeared to hold steady this month. But beneath this placid surface is more tumult than meets the eye.
In July 2024, retirement advisors and their clients remained exactly as confident in the U.S. economy as they had been in June. That's according to the
Every month, RACO surveys hundreds of advisors and measures their confidence on a scale of minus-100 to 100. This month, that score stayed level at minus-4, precisely where it had been one month ago.
But a closer look at the data shows not stability, but dramatic upswings and downswings of confidence in different areas of the economy. The net effect of these contradictions is an overall score that remained flat, but advisors reported spiking anxiety among their clients — particularly with regard to the U.S. presidential election.
"Elections make people nervous and markets will reflect that uncertainty in volatility," one advisor told the survey.
Again and again, wealth managers said politics was spooking their clients. Out of 397 advisors, 67 mentioned the word "election" — though some doubted that it would affect their clients' portfolios.
"The biggest problem right now is the outsized importance that long-term investors like my clients place on politics," one planner said. "I have to explain over and over that
Others believed it was a legitimate concern.
"The election is going to make markets volatile for the remainder of the year," another advisor said.
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Other sources of anxiety included inflation, business slowdowns, the wars in Europe and the Middle East and other geopolitical concerns — including the recent elections in France.
"Seems like the far-right is making headway in areas not seen in 100 years, which will have impacts around the world," one planner said. "It's very hard to see what two years from now could even be like."
The result of all this uncertainty was plummeting confidence in certain areas. Client risk tolerance sank to a score of minus-18 in July, down from minus-8 in June. And asset allocation — a score measuring the bullishness of client portfolios — fell to minus-9, down from minus-3 last month.
Other scores stayed about the same. Faith in the global economic system remained in its usual doldrums, holding steady at minus-49. And confidence in the overall economy inched up by just one point, from 14 in June to 15 in July. Similarly, practice performance ticked upward from 28 to 29.
Meanwhile, confidence surged in the unlikeliest of places: The score for government policy jumped from minus-4 in June to 9 in July.
This puzzling result could be due to a number of reasons. One is that even as clients worry over the election, President Joe Biden's poor performance in the recent debate appeared to make a Republican victory more likely — something that many right-leaning advisors, one of whom complained of "the wreckage caused by Democrats," may see as a positive development.
But there's also another explanation: One government body, the Federal Reserve, is increasingly
"We are looking to the Federal Reserve with regard to interest rates," one advisor said. "Once cuts start, we believe that may be a positive catalyst for fixed income."
Whatever the reason, confidence in Uncle Sam showed marked improvement. Twenty-seven percent of advisors said they had a positive outlook on government policy, up from 15% last month.
This strange combination — rising confidence in the government, coupled with rising anxiety — may also reflect another dichotomy: Clients may fret over the election, but many of their advisors believe its long-term effects will be minimal.
"I have members of both political parties who are concerned about their finances if the other side wins," one planner said. "Financial and market performance don't worry me though. I am agnostic towards how either side winning will affect the markets."
