A Natixis survey of Canadian financial advisors, conducted as part of a larger, global survey of financial advisors conducted in March and April as Canadian stock prices were sliding and the S&P 500 was down 10 per cent from its 52-week high, found that advisors anticipate a rally coming in the second half of 2022.
“Canada’s stock market is predicted to recover losses and finish the year in positive territory, depending largely on inflation, with advisors predicting the S&P/TSX Composite Index to return 5.4 per cent for the year,” they write. Advisors think alternative are more attractive in the current market, with 53 per cent agreeing that commodities are more appealing now, and with 49 per cent saying the same of private assets.” Most advisors – 56 per cent – are counselling clients to avoid cryptocurrency, even while one in four say there are potential diversification benefits.
The advisors surveyed also said they expect the S&P 500 to gain 4.2 per cent before the end of the year, while the MSCI World Index is expected to return 6.4 per cent.
The survey’s summary report, The Big Reset, Post-pandemic markets put financial professionals at a turning point, the 2022 Natixis global survey of financial professionals, highlights responses from 150 financial advisors in Canada. Overall, the firm surveyed 2,700 advisors across Asia, Europe, Latin America, North America and the United Kingdom.
Top portfolio risk concerns
It found that advisors’ top portfolio risk concerns are inflation and market volatility – concerns cited by 67 per cent and 59 per cent of those surveyed. Rising interest rates was cited by 57 per cent of respondents. Relatively few, only 27 per cent said they were concerned about valuations.
Notably, 71 per cent said clients are asking if the time is right to get out of the markets. “They are confident their clients can still realistically achieve 6.5 per cent average annual growth above inflation over the long term. However, their return assumptions are 179 basis points lower than the 8.2 per cent annual returns they believe their clients are expecting,” the report’s researchers write.
“Despite a double-digit correction in stocks and bonds, and near double-digit inflation in the first half of 2022, financial professionals project a market recovery by years’ end and anticipate a five per cent median growth in assets under management for the next year and an annualized median growth rate of 10 per cent over the next three years. Those looking to achieve these goals will have their work cut out for them,” the report states.
The report goes on to look at business growth strategies, including the number of clients advisors think they need to grow their books of business by 2024, the shifting focus from portfolio management to financial planning, prospecting efforts, and investment assumptions.
“Markets in 2022 are giving advisors reason to question long-held investment assumptions and determine what, if any, long term strategy shifts are needed for long-term success,” they write, adding that rates and inflation have been low while global growth has been strong for years. “Most in our profession have based their career on a post-Cold War world that’s opening up,” observes one survey respondent. “Globalization has been the focus. That chapter is done.”