As Macroeconomic Concerns Swell, Advisors Can Add Value

For a variety of reasons, 2022 will go down as a year of macroeconomic volatility and many ordinary investors are acknowledging as much. As ominous as that scenario is, there’s a silver lining because turbulent environments like these are ideal for advisors looking to nurture and enhance client relationships.

Entering this year, it was widely known that inflation was going to be a front-and-center because its emergence in 2021 was badly misjudged as “transitory.” As such, the only thing surprising about the Federal Reserve boosting interest rates is the intensity with which the central bank is doing so.

Part of the dismay surrounding the ongoing rising rates and inflation conversations is that many of the assets that work when these economic conditions arrive aren’t doing so this year. Owing to rising rates, gold is slumping despite inflation being consistently at its worst levels in four decades. Likewise, although rates are rising, bank stocks are faltering. Bitcoin? Let’s just say it’s failing its first true inflation test.

Add to that, data points confirm individuals, including retail investors and prospective clients, have shifting attitudes on myriad topics ranging from mortgage rates to recession concerns.

Inside the Details

Global X recently surveyed 276 individuals on a variety of macroeconomic topics, including gas prices, inflation, mortgage rates and recession speculation. The results are telling, confirming advisors can play pivotal roles in helping clients navigate uncertain times.

“Of the 75% of survey respondents who have a viewpoint on mortgage rates over the past year, over 80% believe they have risen,” notes Global X’s Mayuranki De. “Over 90% of those surveyed have noted fuel prices rising over the last 12 months, with 38% deeming the price hike to be greater than 40%.”

Granted, those are just a few data points, but they underscore the notion that many folks, regardless of age, are concerned about the broader economy and how it’s directly affecting them and their investments. In other words, the time is right for investors that don’t have advisors to consider such relationships. Likewise, advisors need to show they’re up to the task, particularly when it comes to younger demographics – groups that may need the most guidance in perilous economic environments.

Consider the point that many of the oldest millennials entered the workforce leading up to, during or following the global financial crisis. More recently, younger generations – along with the rest of us – had to deal with the coronavirus bear market and the related economic headwinds. That was followed by a yet-to-be-completed era of rising interest rates and the worst inflation in 40 years –prior to the births of many millennials and all of Gen Z.

More Critical Data Points

The Global X survey confirms individuals are deeply concerned about inflation and the potential arrival of a traditional recession.

“More than 80% of those surveyed, remarked concerns over the impact of inflation on their individual investments,” adds De. “Over 50% of respondents foresee the U.S. economy to be in a recession by the end of 2023, while a fifth remain skeptical.”

In what amounts to an excellent conversation starter for advisors, the survey suggests investors are concerned about dividends. However, data confirm those fears are unfounded, presenting advisors with an easy opportunity to enhance client engagement in a turbulent market setting.

Related: Financial Capabilities Increasing, But Advisors Still Needed