Advisors Focused on Managing Volatility and Rising Rates; Optimistic About Economic Growth

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May 16, 2018, 09:05 ET

BOSTON, May 16, 2018 /PRNewswire/ -- U.S. politics, geopolitical issues and future Fed moves were prominent issues on the minds of financial advisors as they reacted to a chaotic and choppy 2018 thus far, according to the Eaton Vance Advisor Top-of-Mind Index (ATOMIX) survey of more than 1,000 financial advisors. Managing volatility retained its position as the top focus for advisors and reached 125.3 on the ATOMIX, up 5% from Q4 2017. Fifty-seven percent of advisors said politics and geopolitical issues will be the biggest drivers of volatility over the next six months, followed by the Fed and the possibility of rising rates (22%). Protection is a key focus for advisors; 53% stated their clients' primary motivation is fear.

"Rising rates, rising inflation and increased geopolitical risks coupled with central banks' transition from monetary to fiscal policy have added a high degree of uncertainty and volatility to the markets in 2018," said John Moninger, managing director of retail sales. "In this environment, there is an opportunity for advisors to deploy a broad range of solutions tailored to client needs to generate returns while managing portfolio risks. At the same time, it is imperative advisors reconsider what has worked in recent years and embrace new ideas for tomorrow's markets."

Despite concerns surrounding volatility, 67% of advisors described investor sentiment as optimistic and confident. Fifty-four percent maintain a bullish outlook for the remainder of 2018, citing a strong U.S. economy and the pace of economic growth. Sixty-five percent believe the new tax law will be a boost for the U.S. economy in the year ahead.

Advisors Anticipate Inflation and Search for Income
Protection against rising inflation emerged as a new area of focus in 2018, with many advisors considering its potential impact on client portfolios. Advisors are allocating to short-duration funds (51%), active inflation protection funds (28%) and short government funds (25%) to help clients combat the effects of inflation.

Nearly half (48%) said generating income is a key consideration for their clients and 39% said income generation increased in importance over the last 12 months. Their top strategies for income generation are dividend funds (64%), followed by balanced funds (45%) and high-yield funds (42%).

"As spreads have tightened, many investors have been chasing yield," said Mr. Moninger. "Limiting duration risk and seeking alternative sources of income and return are increasingly important as advisors look to diversify fixed-income allocations."

Clients Seek Responsible Investing
Responsible Investing continues to gain traction with advisors and their clients. Ninety-four percent said client interest is either consistent or increasing over the last six months. Nearly four out of 10 (39%) consider Responsible Investing factors for all client portfolios. Also of note:

76% of advisors believe Responsible Investing delivers equal or better returns
73% said Responsible Investing is a part of their practice; of those, 31% said it is an important part of their practice
Only 19% of advisors described themselves as very well-informed about Responsible Investing
60% said they are eager to learn more about Responsible Investing

"It's clear more investors are recognizing Responsible Investing as a sound financial, risk management strategy. As it gains popularity, many advisors seek deeper education to become more comfortable talking about Responsible Investing with their clients," said Anthony Eames, director of responsible investing strategy at Calvert Research and Management. "Aligning client values and beliefs with the right Responsible Investing solutions can be a key differentiator for advisors. Calvert is focused on enhancing tools and educational programs for advisors to help bridge the information gap."

Eaton Vance ATOMIX Methodology
ATOMIX is calculated based on the findings of a survey of 1,003 financial advisors from a diverse group of companies. Eaton Vance contracted with a third party to conduct the online survey from March 8, 2018 – April 3, 2018. 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 (NYSE: EV) is a leading global asset manager whose history dates to 1924. With offices in North America, Europe, Asia and Australia, Eaton Vance and its affiliates managed $433.9 billion in assets as of March 31, 2018, 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 eatonvance.com.

* 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%.

Before investing, investors should consider carefully the investment objectives, risks, charges and expenses of a mutual fund. This and other important information is contained in the prospectus and summary prospectus, which can be obtained from a financial advisor. Prospective investors should read the prospectus carefully before investing.

SOURCE Eaton Vance Corp.