According to the latest InspereX Pulse Survey, a shift is underway in the investment landscape as financial advisors anticipate the end of the inverted yield curve. The survey, which polled 384 financial professionals, reveals a consensus among 62% of advisors who believe that rates on the 2-year U.S. Treasury have peaked. Furthermore, only 34% suggest a similar trend for the 10-year note, hinting at a potential resolution to the yield curve inversion.
"The rising rate environment has meant one thing for fixed income markets: bonds are back and once again at the forefront of the asset allocation discussion," John Tolar, head of fixed income sales and trading at InspereX, said in a release. The firm experienced record-breaking sales in October and November, exceeding $12 billion in fixed-income notional value distributed. Notably, InterNotes, tailored corporate debt offerings for individual investors, showcased their best performance of the year in November.
The survey indicates that financial advisors are capitalizing on the higher-yielding fixed-income landscape, with 68% witnessing clients shift equity allocations into fixed income. Tolar further notes, "It's refreshing to see advisors express optimism within fixed income markets moving forward, as they're forecasting an end to the prolonged inversion of the yield curve."
Moreover, the positive impact extends beyond reallocation, with 65% noting that higher rates have improved client conversations, and 61% stating that clients are eager to lock in higher rates for extended periods. Over half (52%) attribute increased business wins to the current rate environment.
However, advisors also exercise caution, with 59% expressing concern that investors may overlook potential risks in fixed income, emphasizing the need for comprehensive understanding beyond interest rates.
While advisors and clients share common concerns, a notable discrepancy emerges regarding a stock market correction. It ranks as the second most significant worry for clients but stands as the least worrisome factor for advisors, signaling a nuanced approach to market sentiment. Here's the list of top worries for advisors and clients:
| Advisor | Client | |
| Geopolitics | 1 | 1 |
| Market volatility | 2 | 3 |
| Inflation | 3 | 4 |
| Recession | 4 | 5 |
| Rising interest rates | 5 | 6 |
| Rising taxes | 6 | 7 |
| U.S. political divide | 7 | 8 |
| Stock market correction | 8 | 2 |
Looking ahead to 2024, financial advisors are poised to increase their utilization of individual bonds by 35% for income generation, making it the top choice among various investment options. Individual bonds, dividend-paying stocks, and bond funds/ETFs rank as the top preferences for income-focused investments.
"Advisors are once again embracing the benefits of individual bonds to help achieve their clients' needs and goals, address personal preferences and elevate the perceived value of their service," Tolar noted. The top reasons cited for using individual bonds include customization (30%), showcasing added value (17%), and improving overall portfolio performance (17%).
The survey also highlights that advisors' focus on relationships with clients, not portfolio performance, sets them apart from the competition. A majority of 57% emphasize the significance of client relationships as their key competitive advantage.
Additionally, advisors express concerns about client behavior, with 28% noting susceptibility to media influences and 27% highlighting short-term thinking as the most concerning client behaviors.
On the technological front, while 79% welcome more technology for portfolio monitoring, 63% assert that real-world experience remains superior in predicting market trends compared to technology.
Relationships are key to our business but advisors are often slow to engage in specific activities designed to foster them.
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