Financial Advisors: The Tide is Turning

Financial advisors are every bit as susceptible to the Recency Effect as everyone else.  Extrapolating a future based on the immediate past has been elevated to something of an art form among those whose job it is to plan for (if not bet on) the future on behalf of their clients.

Jason Zweig has a must-read piece up today on the Recency Effect for his Intelligent Investor column over at the WSJ:

Decision Research, a nonprofit think tank in Eugene, Ore., has conducted a nationwide online survey of investors seven times since 2008. These surveys have shown that investors’ forecasts of future returns go up after the market has risen and down after it has fallen.

William Burns, an analyst at Decision Research, says investors’ forecasts of the market’s return over the coming year were heavily swayed by how stocks performed in the previous month.

So take the below with a grain of salt, but understand its importance as you see dips like Friday’s continue to be bought.  The guys with the buying power are now in the bull camp.

After a strong January for the markets, financial advisors have turned sharply more bullish for 2012, according to two surveys conducted by SEI Advisor Network in mid-January and again in early-February…

The survey was completed by more than 100 advisors, the majority of whom manage more than $50 million in assets. Some key statistics from the February survey are:

  • 90% of advisors predicted positive return for S&P 500 in 2012 (a 18% increase from results in mid-January)
  • 50% increase of advisors predicting gains of greater than 5% in S&P 500 from January to February
  • More than 33% predict that the “Pessimism Bubble” will burst in 2012
  • Nearly 33% said “the tide is turning” for the economy
  • Most accurate phrases to describe today’s investing world: “Bull markets climb walls of worry,” and “A rising tide lifts all boats”
  • 87% say likelihood of payroll tax cuts being extended beyond February have a 50/50 chance, or better

According to the research cited in Jason’s piece, 40% of people use the recent past as their predictor while another 40% or so say that what’s happened in the recent past is about to revert back the other way.  Everyone else just says the future is random or unknowable.  I wonder what that research would look like were it conducted on just FAs who handle other peoples money…

Sources:

This is Your Brain on a Hot Streak (WSJ)

SEI

 

 

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. masaje domicilio barcelona commented on Jun 08

    masaje domicilio barcelona

    […]one of our guests just lately proposed the following website[…]

  2. free nintendo games commented on Jun 09

    free nintendo games

    […]Sites of interest we’ve a link to[…]

  3. boston bitcoin commented on Jun 09

    boston bitcoin

    […]please visit the websites we comply with, like this one, because it represents our picks in the web[…]

  4. Used cellphone commented on Jun 10

    Used cellphone

    […]Sites of interest we’ve a link to[…]

  5. سئو سایت commented on Jun 10

    سئو سایت

    […]Here are a few of the websites we suggest for our visitors[…]

  6. first anal toy commented on Jun 11

    first anal toy

    […]we prefer to honor many other world wide web web-sites on the internet, even if they aren’t linked to us, by linking to them. Below are some webpages really worth checking out[…]

  7. how to use head honcho commented on Jun 11

    how to use head honcho

    […]The data talked about in the post are a number of the most effective readily available […]

  8. get rich quick commented on Jun 11

    get rich quick

    […]we like to honor a lot of other net internet sites around the internet, even when they aren’t linked to us, by linking to them. Underneath are some webpages really worth checking out[…]

  9. rotating rabbit commented on Jun 11

    rotating rabbit

    […]Here is an excellent Blog You may Come across Intriguing that we Encourage You[…]

  10. auto taxi commented on Jun 12

    auto taxi

    […]always a massive fan of linking to bloggers that I love but really don’t get a great deal of link love from[…]

  11. tongue vibe commented on Jun 12

    tongue vibe

    […]Sites of interest we have a link to[…]

  12. most powerful bullet vibe commented on Jun 12

    most powerful bullet vibe

    […]the time to read or take a look at the material or sites we have linked to beneath the[…]

  13. Beratung commented on Jun 13

    Beratung

    […]one of our guests not too long ago suggested the following website[…]