Fifty-four percent of financial advisors in a new survey expect the equity market to be up by 10% in 2022, InspereX reported Monday. But just 5% of advisors expect a repeat of this year, with the market up by 20% or more.
Twenty-eight percent of advisors predict the market will be flat, and 13% expect markets to be down by 10% or more.
Seven in 10 respondents do not foresee calm equity markets ahead with low volatility and more record highs; in fact, 95% said there could be several equity market corrections in 2022.
More than half of advisors said they expected inflation to become a greater challenge but not big enough to end the stock market rally. In addition, only 21% of advisors believe the pandemic's influence on markets is over, while 39% are unsure and 40% said it was not over.
Asked what their clients are very worried about, 57% of advisors said taxes, 40% cited market corrections and 38% said inflation.
InspereX is the tech-driven fixed income and market-linked product distribution and trading firm formed earlier this year from the merger of Incapital and 280 CapMarkets.
Red Zone Marketing conducted the sixth InspereX Pulse Survey in mid-October among 260 respondents representing some 50 broker-dealers, banks and RIAs.
Tough Retirement Conversations
Fifty-one percent of advisors in the survey forecast 10-year Treasury interest rates to hover between 1% and 2% for 2022, but 41% forecast rates at 2% to 3% or more. Just 8% see rates going down to between 0% and 1%.
The effects of lingering low rates? Many advisors fear for their clients in retirement and are having some tough conversations.
Forty-two percent said their retired clients are using more of their principal as income replacement because of low interest rates. Thirty-two percent expressed concern that some of their clients will outlive their retirement savings unless yields rise significantly.
Thirty percent said their clients are "tired of hearing me explain they have to take more risk if they want more yield," and 10% said they have lost clients because they "could not generate the income clients wanted within their risk tolerance."
"In a lower-return environment, investors are generally seeking to protect their downside during periods of volatility," Chris Mee, managing director of market-linked products at InspereX, said in a statement.
"They aim to capture upside in the market and to avoid stalling growth, which could impact their ability to achieve their financial objectives."
