Registered investment advisors are a little more optimistic following the election of Donald Trump but express concerns about inflation, recession and market volatility, according to the latest RIA Economic Outlook Index.
The report by Security Benefit in partnership with Greenwald Research found that the RIA sentiment surrounding economic conditions — measured on a scale from 0 (extremely pessimistic) to 100 (extremely optimistic) — increased to 56 after falling to 53 in the third quarter of 2024. However, it remains below Q1 2024, when it was 58.
“Optimism around the direction of the markets in 2025 is tempered by the belief that progress on inflation will be muted,” say Mike Reidy, National Sales Manager, RIA Channel at Security Benefit, in a news release. “Nearly half still see at least a moderate likelihood of a recession and just over half see continued market volatility throughout the year. With all this in mind, it is important that clients and advisors prepare their portfolios for all scenarios with protection-based products.”
In line with the Federal Reserve’s December’s economic projections, inflation concerns have ticked up among RIAs, as 40% expect inflation will be at least 3% in the next 12 months — a 7% increase since Q1 2024. While RIAs’ overall outlook has improved slightly, 48% of advisors continue to say there is a moderate or high likelihood of a recession in the coming year.
Among RIAs surveyed, 32% say they were not at all or not too concerned about a major stock downturn in the next 12 months. Additionally, 20% say the S&P 500 is likely to see an increase of 10% or more in the next 12 months.
Over half (54%) of RIAs say stock market volatility will be higher in the next 12 months than in 2023. But one in six is at least very concerned about the risk of a major stock market downturn in the next 12 months.
RIAs report they are maintaining their allocations, with 72% saying that they are not changing in their investment strategies in response to the election results. A quarter of RIAs plan to become more aggressive with client allocations.
Among RIAs, 75% reported clients ask about the expiration of the Tax Cuts and Jobs Act (TCJA), and 80% of RIA believe TCJA renewal is likely this year. If it is not renewed, 75% advisors believe it would slow the economy, although 47% say it would affect interest rates.
In the event of nonrenewal, 65% of RIAs say they would increase the use of tax-preferred investments to protect client assets.
