The COVID-19 pandemic has dealt a significant blow to the economy and although the markets have shown signs of recovery in the past six weeks, a new survey indicates that advisors are feeling bearish about the next six months.

Key Takeaways

  • Spanning the period immediately preceding the COVID-19 pandemic and extending into the declaration of a national emergency in the U.S., the “2020 Trends in Investing Survey” indicates that financial advisors are feeling bearish about the economic outlook for the next six months.
  • Among the survey’s findings, 25% of advisors say that they plan to increase their use of individual stocks, compared to just 15% in 2019. 
  • Despite market conditions, ESG funds are on the rise with 38% of advisors currently using them.

This year’s “2020 Trends in Investing Survey,” an annual survey conducted by the Financial Planning Association (FPA), in partnership with the Journal of Financial Planning and Janus Henderson, highlights key advisor concerns amid the volatility of the past few months. 

Conducted in March of this year, the survey offers the unique perspective of being able to track advisor perspectives on the COVID-19 pandemic in real-time, highlighting the shift in advisors’ economic outlook once President Trump declared a state of emergency on March 13, 2020. Although only 12% of advisors were feeling bearish in the period immediately preceding the pandemic, that number quickly shifted to 31% by March 13.

Advisor Outlooks and Portfolio Management

Among the key findings of the survey is the fact that advisors are currently choosing equities over cash and cash equivalents. In fact, 25% of advisors plan to increase their use of individual stocks this year, compared to just 15% in 2019—a 66% increase. 

“It’s not surprising to see more advisors re-evaluating their asset allocation strategy,” said Adam Hetts, Global Head of Portfolio Construction and Strategy at Janus Henderson Investors, highlighting some of the key findings of the study. “An unprecedented market environment seems to have translated into an unprecedented amount of rebalancing and reallocation. What’s really different to me about this year is the humbling effect this sell-off has had on investors—portfolio losses once thought unique to the Global Financial Crisis have come back again. When once-in-a-lifetime losses become once-in-a-decade, everything changes.”

ESG Funds Are Seeing Continued Growth

Despite the market swings of the past few months, one thing remains clear: ESG funds are on the rise and 38% of advisors are using or recommending them to clients. That’s a 46% increase over both 2018 and 2019. What’s more, the survey showed that 29% of advisors are planning to increase their use of ESG funds over the next 12 months and almost 40% reported that clients had asked them about investing in these types of funds over the past six months. 

Advisors' perspectives on ESG indicate that sustainability could be one of the key factors to consider over the coming months, and Janus Henderson suggests that investment strategies focused on sustainability tend to fare better during market downturns. If that holds true, this could mean an even bigger increase for ESG funds in the future.

The Bottom Line

The COVID-19 pandemic and market turmoil of the past few months has had a marked effect on both investors and advisors. And while the markets are beginning to settle, many advisors seem wary that the worst has passed. Although the full impact remains to be seen, it’s safe to say that for the moment, advisors are being cautious in their short-term outlook.