RIAs don't seem to be looking at the same same U.S. economy, stock market. The Advisor Confidence Index (ACI) bounced back from the sharpest one-month drop in its three-year history in March to register 3.21% advance in April, largely on better outlook on short-term prospects for the U.S. stock market.

"We remain cautiously optimistic that although we are in the midst of an economic slowdown, the markets will continue to perform well over the next six months," says Frederick Wright, CIO of Atlanta-based Smith & Howard.

The ACI, which is based on a monthly survey of 150 independent RIAs by Advisorbenchmarking, rose to 116.11 in April from 112.50 in March. |image1|

The ACI goes from a "very negative" 33.33 to a "very positive" 166.67; its mid point, 100, represents a neutral outlook on the stock market and the economy. The ACI first saw light in April 2004. It hit an all-time high of 121.41 in December 2005 and an all-time low of 106.07 in June 2006.

Three of the ACI's four components advanced in April. Advisors' current assessment of the U.S. economy rose by 3.00%, their view of the economy six months out rose by 3.46%, and their confidence in the stock market's performance six months out rose by 6.77%. The weak spot was the RIA view of the economy a year out, which edged down by 0.29%. |image2|

The Conference Board's Consumer Confidence Index retreated to 104.0 in April from 108.2 in March.

Politics, anyone?

Despite the ACI's cautious advance, there seem to be nearly as many economies as there are RIAs to interpret its temperament.

Bill Ramsay of Raleigh, N.C.- based Financial Symmetry says the U.S. economy is showing "remarkable resilience" but that stocks look to be priced above long-term fair value "when consideration is given to the high profit margins." That, he says, makes "be careful" the watchword for investing in present market conditions.

Gregory Horn of Bell Blue, Pa.-based Persimmon Capital Management sees the recent slowdown in capital-spending as "problematic" because of its coincidence with waning consumer spending in response to a softening housing market. "We are in for a difficult period over the next 12 months in the financial markets and expect volatility to continue to increase," he adds.

James Dailey of Harrisburg, Pa.-based TEAM Financial Managers takes a more somber view. He says the recent stock-market decline "is just an initial warning shot and small taste of what is to come once the speculative environment finally exhausts itself."

Finally Pat Raskob of Tucson, Ariz.-based Raskob Kambourian Financial Advisors thinks the economic malaise is mainly an by-product of politics. "The tone of the potential election candidates, as well as the congressional arguments, have made the country very unhappy and stressed," he says. "Many clients are just fed up with all the verbal abuse and negativity [and] they just want it to stop."

Advisorbenchmarking is an affiliate of Rydex Investments. -FWR

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