New York, NY/ August 29, 2013 –Financial advisors’ optimism in the economy and the markets deflated in August, falling almost 3% from July’s reading. Advisors say they are particularly concerned about a near-term correction in equity markets.

The WealthManagement.com Advisor Confidence Index (ACI), a benchmark of financial advisors’ views on both the current and future states of the U.S. economy and the stock market, fell 2.9% in August to 112.62; while still in positive territory, a lower level of optimism suggests advisors feel less confident in the near-term economic prospects. WealthManagement.com is a division of Penton.

Advisor optimism in the near-term future of the stock market fell even further than the broader reading, dropping by 5%. Most advisors who commented suggested the continued monetary policies of the Federal Reserve were giving an artificial boost to equities, and while the economy is showing signs of improvement, the markets have gotten ahead of the fundementals.

“The economy is in a weak recovery, but moving up nonetheless. The stock market has moved ahead of the economic recovery, currently benefitting from some flight from bonds to stocks. I expect some correction in the 5-10% range over the next 3-6 months,” says Robert Cochran, an advisor with PDS Planning in Columbus, Ohio.

Gregory Horn, founder of Persimmon Capital in Blue Bell, PA., suggests investors look beyond U.S. markets for returns. “With retail investors now piling into equities at record levels and the Fed considering when to begin tapering debt purchases, it’s time to reduce exposure to stocks in spite of the faint glimmer in the US economy. Equity capital may be better deployed at or near the bottom of the cycle in Europe on a selective basis.”

Most advisors suggest the stock market has been artificially inflated thanks to the Federal Reserve’s bond buying program. “The U.S. economy, and to a greater extent, the U.S. stock markets are being artificially boosted by massive and historic doses of monetary intervention. I have yet to find anyone, anywhere who believes the equity markets would be at the current high levels were it not for this artificial influence. Caution, prudence and intelligent investing should be the focus in this environment,” says Kenneth W. Katzen of Post Oak Investment Management in Houston, Tex.

Not all advisors are reducing their confidence. “I believe the US economy and the US stock market is one the verge of a long period of sustained economic and capital market growth. Virtually every form of speculative excess has been cleared from the capital markets in the last 13 years, with the possible exception of the Treasury market,” says Brian Gilmartin of Trinity Asset Management in Chicago.

While advisor views on the near-term state of the economy remained relatively unchanged from July, confidence in the longer term prospects for the economy also took a hit, falling 2.5% over the month of August.

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Key Stats

Current state of the economy: -2.8%

Economy in six months: -.5%

Economy in twelve months: -2.5%

Markets in six months: -5%



WealthManagment.com’s ACI records the views of a panel of some 150 financial advisors who agreed to participate on a monthly basis, recording their level of confidence across four categories: confidence in the current state of the economy, confidence in the economy in both six months and 12 months, and confidence in the near-term future of the stock market.

About Advisor Confidence Index’s Methodology
The Advisor Confidence Indexis a benchmark that gauges advisors’ views on the economy. The ACI captures the views of a panel of 130 financial advisors, all of who agreed to respond to the survey. The survey asks four questions – an advisor’s view on the economy, the economy in six months, the economy in twelve months and the stock market – on a scale from most pessimistic to most optimistic. The cumulative average is calculated for each question and then added for the overall benchmark.

About WealthManagement.com
As the digital resource of REP. and Trusts & Estates, WealthManagement.com provides everything wealth professionals need to know to stay knowledgeable about the industry, build stronger relationships, improve their practice, and grow their business—all from one site. It boasts more than 60 editorial contributors who provide content for the more than 645,000 members of our wealth management community.

About Penton
For millions of business owners and decision-makers, Penton makes the difference every day. We engage our professional users by providing actionable ideas and insights, data and workflow tools, community and networking, both in person and virtually, all with deep relevance to their specific industries. We then activate this engagement by connecting users with tens of thousands of targeted providers of products and services to help drive business growth. Learn more about our company at www.penton.com/.

Penton is a privately held company owned by MidOcean Partners and U.S. Equity Partners II, an investment fund sponsored by Wasserstein & Co., LP.

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