Retirement advisors and their clients are feeling slightly better about the U.S. economy this month. As for the U.S. election, however, anxiety is rising.
That's according to the latest data from Arizent's
In June, that confidence suddenly broke a three-month losing streak. RACO's overall score suddenly rose to minus-4 this month, up from minus-7 in May. That leaves retirement confidence still in negative territory, but it also marks the first time the score increased since February.
"Clients are complacent right now, and volatility is at the low end of the range," one advisor told the survey.
But that's far from the whole story. While advisors and clients may be feeling more sanguine about the economy, they appear to be more worried than ever about politics. Out of 191 open-ended survey responses, 48 mentioned the election as a concern — more than inflation, stock volatility and interest rates combined.
"The election seems to have everyone on their tiptoes," one wealth manager wrote. "The unknown there has everyone concerned."
Or, as another planner put it simply: "Clients are afraid of the election."
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This widespread anxiety is somewhat incongruous with RACO's data, which mostly showed improvement this month. The client risk tolerance score inched upward, from minus-10 in May to minus-8 in June. Asset allocation rose from minus-8 to minus-3, and practice performance jumped from 21 to 28.
"The election news is mostly noise, despite client interest," one advisor said. "The main things are the economy, earnings and the Fed. Earnings are good enough, and the Fed is talking tough but may have room to ease before long."
In the Federal Reserve's long battle with inflation, the past month has seen a few glimmers of hope. After months of discouraging inflation data, the news in May was better: CPI (consumer price index) inflation ticked slightly downward in April, and PCE (personal consumption expenditures) inflation remained the same.
So by early June, some retirement advisors were cautiously optimistic that the Fed could start cutting rates in the foreseeable future.
"I don't think the Fed will lower rates [this month], but I think we will see it by the end of the year," one planner said.
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Perhaps with that in mind, advisors gave government policy a higher score in June: minus-4, up from minus-11 in May. In RACO's survey, 19% of advisors said they held a positive outlook on government policy, up from 15% last month.
Confidence in the overall economy went up as well, rising from 12 in May to 14 in June.
Other scores slid downward. Faith in the global economic system, always a low score, slipped from minus-46 to minus-49. In their comments, advisors brought up a number of geopolitical concerns.
"The war in Gaza, the Russian invasion of Ukraine and tensions in the South China Sea increase uncertainty and may affect global prices of commodities," one wealth manager said.
But more than anything, the source of anxiety for clients — and more than a few advisors — was clear:
"Though I am a believer that the election has little to no effect on the stock market, my clients are very worried — on both sides of the aisle — that the other party may win," one planner said.
Others stressed over the possibility of a disputed outcome.
"Possible violence regarding the election will impact the markets negatively," one advisor said. "The United States could lose its standing as a bastion of democracy and economic security."
But even when advisors shared the same concerns, they weren't always on the same timeline.
"Volatility will probably rise modestly, and that causes clients to become nervous," one wealth manager said. "I expect the presidential election will become a topic of concern in a few months."
