But advisors are wary in view of high oil prices, Fed tightening. Registered investment advisors (RIAs) had a more favorable outlook on the U.S. economy and equity markets in June, according to the AdvisorBenchmarking Index. The June uptick follows a sharper rise in May, and marks the first two-month increase in the 15-month history of the index. That said, overall sentiment remains decidedly lukewarm.

Advisors’ confidence level, as measured by the AdvisorBenchmarking survey of 150 independent RIAs, rose 1.97% on the index to 116.45 from 114.20 in May – which saw record 2.7% jump from 111.12. That said, the index has still not recovered from a 7.3% month-over-month drop in April. The index scale goes from a “very negative” 33.33 to a “very positive” 166.67; the mid point, 100, represents a neutral outlook on markets and the economy.

The Conference Board’s Consumer Confidence Index – based on a representative sample of 5,000 U.S. households – also re-bounded for the second month in a row in June. It rose 3.6% to 105.8. from 102.1 in May.

Unimpressed

Although RIA sentiment has been on the mend since an early-spring plunge, the optimism is still subdued. “I continue to believe that the most likely scenario will be continued growth in the economy albeit at a less robust pace than many investors might like to see,” says Daniel Roe of Budros Ruhlin Roe Wealth Management in Columbus, Ohio. “Uneven indicators from month to month will likely raise some doubts, but the trends should generally be positive over the next six to 12 months.”

Robert Isbitts of Emerald Asset Advisors in Weston, Fla., isn’t so sure about that. If leading indicators hold any weight then “we should smell trouble coming,” he says. “The fact that spiking oil prices, rising gold and curve flattening does not phase stocks leads us to the conclusion that the stock market is getting tired, and the rally that started in October 2002 is nearing its end.”

Only one of the ten indicators that make up the Conference Board’s Index of Leading Economic Indicators (LEI) increased in May: stock prices. After an early-year climb, the Economic Cycle Research Institute’s Weekly Leading Index – arguably a more sensitive gauge than the LEI – has deteriorated in recent months.

Michael Sadoff of Milwaukee, Wisc.-based Sadoff Investment Management sees some interest-rate relief in the offing, but not before there’s damage done. “The continued Fed tightening – as it always does – will lead to a financial crisis,” he says. And in his view that crisis will occur before the year is out, causing “the Fed to start easing, possibly in early 2006.”

Modeled after the Consumer Confidence Index, the Advisor Confidence Index gauges advisors' views on the economy. Participating advisors answer four multiple-choice questions every month reflecting their views on the economy. Three questions gauge their views on the economy for the current time period, the subsequent six-month period and the subsequent 12-month period. The fourth question gauges their outlook on the stock market for the subsequent six months. AdvisorBenchmarking is a research affiliate of Rydex Investments. –FWR

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