Investors and advisers are both feeling a bit more confident about the economies in the U.S. and UK, but inflation, rising unemployment and government spending cuts continue to be a growing concern among most financial advisers following early First Quarter (Q1) 2012 reports.
Financial advisers are usually a good measure of market mentality and a sense of renewed confidence could be the first real sign of markets in recovery. Most analysts feel that market volatility and uncertainty will often be accompanied by new opportunities, and savvy investors should be ready to position themselves and their clients for a potential market comeback.
Continued high unemployment remains an area of concern, and the latest unemployment reports have done little to raise hopes. However, the latest government data on inflation show a small decline that could be an early sign of the effects of government spending cuts are having on consumer spending habits. With an average confidence rating of just
4.6 points out of 10 for Q4 in 2011, the most recent indicator of renewed market confidence at 5.2 points is a 13% increase in confidence in the first quarter of this year compared to the last.
European debt problems still remain a huge concern for banks worldwide, as many European nations are seeing their unemployment rates jump from 9.3% to 15% along with new government spending cuts ranging from 5.5% to 8.1%. However, most financial advisers still feel that inflation will continue to decline in 2012. During the first quarter of 2011, only 11% of financial advisers reported that they thought inflation would decline. This quarter there has been a big increase and now 66% of financial advisers surveyed believe inflation will decrease in the year ahead. The same optimism applies to interest rate predictions, with nearly three-quarters of all financial adviser survey respondents saying they feel that interest rates will continue to remain at super low rates throughout 2012.
