Financial sentiment dominated by 'cautious optimism' ahead of election, advisors say

Hello financial advisor. We are taking an informal poll. How would you describe the "financial sentiment" of your clients? Positive? Negative? Indifferent?

The final University of Michigan Consumer Sentiment Index (MCSI) report for October is set for release this Friday. It will be the final report before the US presidential election. The MCSI is a monthly phone poll that tracks consumer sentiment by asking respondents about their views on the economy. The results are then used to gauge the mood of American consumers.

Last week, the preliminary MCSI October reading fell 1.2 index points to 68.9, the first drop in three months, even though the index was up 8 percent from last year. For the final reading of October, Wall Street forecasters see sentiment ticking up slightly to 69.5. The final report covers the full month, while the preliminary report covers the responses from the first two weeks of the month.

Continued frustration over inflation has been weighing on consumers, according to the University of Michigan. But what about investors? Are they frustrated? Considering the more than 38 percent jump in the S&P 500 in the past 12 months, one would think they would be in a pretty pleasant mood.

But then again, one never knows, does one?

With that in mind, InvestmentNews did its own very, very informal poll to find out the mental and emotional state of investors heading into both the election and the end of 2024. We reached out to a number of financial advisors and asked them how they would describe the “financial sentiment” of their clients at this date and time.

Some of them were too busy to get back to us, which is understandable, considering they have day jobs. Others were kind enough to reply to our query.

Stan Gregor, CEO of Summit Financial, for example, said most of his clients are feeling good about their financial futures. Yet while they are currently optimistic, he said there is concern about the potential economic impact of either presidential candidate's election. Their focus is on how new presidential policies, particularly regarding international trade relations like those with China, might reshape the economic landscape, according to Gregor. 

"The robust US economic growth, which is envied worldwide, provides a strong foundation,” Gregor said. “However, an undercurrent of apprehension persists due to the significant influence a new president could wield over the economy. Ultimately, our clients seek a leader who will foster stability, consistency, and continued economic expansion."

Meanwhile, Michael P. Butterworth, president of MP Butterworth and Associates, a Berthel Fisher firm, said his clients remain optimistic in the face of the upcoming election. He adds that the vast majority have “benefited from the ongoing bull market, with their portfolios structured from growth, albeit with some downside protection.”

“I’ve always tried to counsel clients to live within their means, avoid impulsive spending, and realize that investing is a long-term game. That way, no one individual event, whether it’s an election or something else, will have a deep impact on their retirement,” Butterworth said.

Elsewhere, Scott Bishop, managing director at Presidio Wealth Partners, believes the financial sentiment vibes he is picking up from clients are “class” based and perhaps not reflective of the greater populace. 

“We all feel that inflation is bad, but we still see malls packed and people spending. The consumer is not dead, it may be racking up higher credit card balances to make ends meet, but at least for now, they are still spending,” Bishop said. “That being said, my clients are in the top 1 percent and they worry about others. Most of them are not living paycheck to paycheck.”

Along similar lines, Chris Brown, private wealth advisor and managing director at Kingswood US, said the general financial sentiment for his clients has been positive, but there is concern about inflation overall for consumers in general.

“I often hear them say things like, ‘I don't know how people with average incomes make it work,’" Brown said.

On the same topic of inflation, David Bigelow, wealth manager at Coldstream, says his clients are feeling positive about their financial futures and will over time be less shocked by inflation.

“As the shock of higher prices wears off and they adjust to the ‘new normal’ at the grocery store, long-term concerns have shifted away from inflation,” Bigelow said. “Currently, some of the most common concerns are around the solvency of Social Security, their young-adult children being able to afford a home, and if they should keep paying their skyrocketing long-term care insurance premiums.”

Inflation remains a central topic in his discussions with clients, according to Jeff Brown, president of Stratos Private Wealth. The rising costs of goods and services are not only affecting day-to-day living but also influencing long-term financial strategies, in his view.

“Our clients are keenly aware of how inflation can impact their portfolios and are seeking ways to protect their purchasing power, despite the fact that long-term inflation expectations have been trending downward,” Brown said, adding that recent global macro events and geopolitical tensions are also of “significant concern.” 

Moving on, Jonathan Rosner, wealth advisor at Tripoint Wealth, feels the financial sentiment of his clients is generally positive heading into the election. While he does sense some concern around the potential for an uncertain outcome and increased end-of-year volatility, he believes those concerns are generally overshadowed by more positives in the intermediate and long-term.

“Beyond the secular growth trend of the AI revolution, the broadening of the equity rally, and the Fed embarking on its first easing cycle since 2020, private market investments are helping to stabilize portfolios with attractive risk/return profiles,” Rosner said. “We have also stress-tested many client portfolios through robust financial planning and scenario analysis, which has brought many of them peace of mind.”

Despite macro data to the contrary – like positive jobs reports, lower inflation, and continuing GDP growth – clients have expressed worry about the year ahead, according to Steve Stanganelli, certified financial planner with Clear View Wealth Advisors. In his view, most of this is related to uncertainty about the election – not only the results in November but on the transition of power in January.

“Most clients are pleased with stock market results. Investors are seeing continued increases in their portfolios, but whether retired or younger, most have expressed concerns about everyday costs like groceries and, in particular, increases in property taxes and property insurance,” Stanganelli said.

He added that an increase in the number and severity of storms has resulted in larger-than-expected increases in property insurance premiums, and he has also been hearing from folks expressing concern that tech stocks are over-valued.

“They’re concerned that the floor might fall out beneath the Magnificent Seven and drag everything lower,” Stanganelli said.

Matt Liebman, CEO of Amplius Wealth Advisors, meanwhile, said his clients currently feel positive about their financial situation for the most part. One notable exception, he said, are clients who work or extensively invest in the real estate sector.

“The election itself is the biggest drag on sentiment right now,” Leibman said. “Clients on both sides of the political divide seem disenchanted with the choices and nervous about the outcome. That said, for the most part, our clients currently feel positive about their individual financial situations due to having more wealth given the recent strength in capital markets.”

Brian Baker, founder of The Baker Financial Group, a part of Strategic Blueprint, reveals that his clients have benefited from recent positive market performance but remain cautious “due to concerns about the country’s direction and leadership, no matter the outcome on Election Day.”

“This mix of optimism and unease creates a guarded outlook,” Baker said. “While they appreciate the financial gains, there is hesitancy about future stability, and many are leaning towards increasing exposure to strategies that protect against downside while staying open to growth opportunities.”

Finally, Adrianna Adams, certified financial planner with Domain Money, agrees that “cautious optimism” is a dominant theme emanating from clients as the election and holidays near.

“They feel secure in their financial future but want to ensure they’ve accounted for any potential risks as they continue making important financial decisions. Our clients are looking to strike a balance between preparing for possible challenges and pursuing new, exciting opportunities," Adams said.