Market Volatility and Interest Rates Lead Advisor Concerns

By Eaton Vance Corp. Special for  USDR

Key Advisor Top-of-Mind Index (ATOMIX) Survey  Findings:

  • Volatility measured 109.5 on the Index in the second quarter of 2015, up from 102.2
  • Income measured 111.5 on the Index, up from 96.3 last quarter
  • 87% say that at least some of their clients are wary of equities
  • 74% of advisors are concerned about an interest-rate increase
  • 69% of advisors believe their clients are motivated by fear
  • 56% believe their clients view market volatility as a risk rather than an opportunity

Managing market volatility, preparing for a possibly imminent rate hike, and generating investment income in a low-return environment are the top concerns of financial advisors and their clients, according to the most recent ATOMIX survey conducted by Eaton  Vance.

The survey of 1,006 financial advisors found that many retail investors are anxious about a market correction, with a strong majority (87%) of advisors reporting that at least some of their clients are wary of equities and 7 in 10 (69%) believing that their clients are motivated by fear. Nearly 6 out of 10 (56%) advisors believe that their clients view market volatility as a risk, and typically mitigate market risk through diversification (65%) and moving holdings into cash  (41%).


“Volatility always lurks, but how investors are preparing for and managing volatility is what really matters,” said Eaton Vance Managing Director John Moninger. “It starts with having a plan to address the effects of volatility on a portfolio and harnessing the opportunity it may create to influence long-term  goals.”

Edward Perkin, chief equity investment officer at Eaton Vance believes skittish investors are contributing to increased volatility. “Taking a disciplined approach to research and stock-specific fundamentals can help calm market fear and position investors to take advantage of the opportunities market volatility  generates.”

Less clarity in the market means fewer clear signals for investors, according to Kathleen Gaffney, co-director of diversified fixed income at Eaton  Vance.

“There is a lot of uncertainty in the market right now, which has historically led to good value,” Ms. Gaffney said. “In a market environment driven by low yields and uneven global growth, it’s critical to respond in a thoughtful, rational way that allows investors to take advantage of undervalued opportunities that can potentially lead to long-term  rewards.”

Concerns over the impact of rising rates  persist

Three quarters of advisors (74%) report at least some concern about a near term increase in rates, and 1 in 5  say they are very concerned. The majority of advisors expect rates will rise in the next 12 months, with 4 in 10 (42%) predicting an increase in the first half of 2016 and another 38% expecting a move will come in the second half of  2015.

As Fed action possibly looms, most advisors are taking measures to prepare their clients for rising interest rates. One-third (34%) of advisors have already taken action, while another 47% are currently adjusting portfolios on their clients’  behalf.

Low yields and uneven global growth have advisors searching for  income

Advisors’ concerns over income rose to 111.5 from 96.3 last quarter, while nearly half (49%) of advisors say generating income from investments increased in importance over the past six months. This increase has been driven in part driven by the perception that fixed income markets are at their peak and may be poised for a  correction.

Ms. Gaffney believes the payoff may be worth the wait. “Our approach is centered on embracing market uncertainty, which often translates into riding out periods of volatility,” Ms. Gaffney said. “That sometimes feels uncomfortable in a low-yield environment, but we believe patience will ultimately be  rewarded.”

Eaton Vance’s quarterly ATOMIX is part of an ongoing study that measures the overall importance of key issues facing financial advisors and their clients, combined with how fast these issues are increasing in  importance.

Eaton Vance ATOMIX  Methodology
ATOMIX is calculated based on the findings of a survey of 1,006 financial advisors from a diverse group of companies. Eaton Vance contracted with a third party to conduct the online survey from June 18  July 10, 2015. ATOMIX uses a similar methodology as the U.S. Consumer Confidence Index* (which has no affiliation with Eaton Vance) in that it calculates a weighted average of current perceptions (40% of the Index) and what advisors think about the trends (60% of the Index). The Index set a baseline average of 100 for April 2014. Each component measured is tracked quarterly to illustrate changes in advisor perceptions and changes in trends over time. Future surveys will sample different financial advisors and may produce different  results.

Eaton Vance Corp. (NYSE: EV) is one of the oldest investment management firms in the United States with a history dating to 1924. Eaton Vance and its affiliates managed $312.6 billion in assets as of July 31, 2015, offering individuals and institutions a broad array of investment strategies and wealth management solutions. The Company’s long record of providing exemplary service, timely innovation and attractive returns through a variety of market conditions has made Eaton Vance the investment manager of choice for many of today’s most discerning investors. For more information, visit

* The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch. The Consumer Confidence Index was started in 1967 and is benchmarked to 1985=100. The Index is calculated each month based on a household survey of consumers’ opinions on current conditions and future expectations of the economy. Opinions on current conditions make up 40% of the Index, with expectations of future conditions comprising the remaining  60%.

SOURCE Eaton Vance  Corp.

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.