Everyone’s Feeling Less Optimistic About the Economy

Now is the winter of our discontent.

The cost of living, political dysfunction, international conflicts and the risks associated with artificial intelligence are creating plenty of existential dread. And it’s showing up in how people feel about their finances. Interestingly, even advisors aren’t feeling so hot these days.

Just over half of CFPs reported having a positive financial outlook this fall, down from 61% in the summer and 54% a year ago, per the latest CFP sentiment indices report. Meanwhile, CFPs say just 38% of their clients have a positive financial outlook, down from 50% in the summer.

While a client’s financial situation is largely shaped by things they can control, such as income and spending habits, it’s difficult to stay focused on those things when the rest of the world feels like it’s on fire.

“The worry has moved from [clients’] own finances to the world around them,” said Eileen Olson, founder of Emerald Wealth. People are increasingly bringing up geopolitics, elections, conflicts abroad and tariffs, asking how they’ll affect their portfolios, she said. “Fear is contagious,” she said, adding that even things like homeownership, retirement savings and a reliable job don’t feel like the financial stability they used to.

Look Around

Perceptions of the economy don’t always line up with the headline numbers. Even when economic growth and financial markets are strong, that can feel rather abstract compared with the price of gas, eggs or a hospital stay.

When people see loved ones losing jobs, lacking retirement plans or not having emergency savings, it creates anxiety, said Georgia Bruggeman, founder of Meridian Financial Advisors.

“Whether someone feels positive or negative about the economy can often depend on their specific situation, the news they are listening to and what their friends and family are saying,” she said. Some of the top concerns are whether clients’ kids can afford a home, paying for their grandkids’ college and funding long-term care.

There may also be reason to temper expectations for future market returns:

• Vanguard’s latest 10-year outlook projects annualized US stock returns of 4.8% to 6.8%. 
• Meanwhile, Fidelity’s 20-year projection sits at 5.6%. The asset manager expects stocks to outperform bonds but only by a small historical margin.

Now You’re Catching On. Advisors’ goal right now is keeping clients grounded, and thankfully, some already have the right mindset. “For younger clients, a lot of them are thinking, ‘Well, it would suck if the market does go down, but at least I would get to buy more for the long term,’ which is the right mentality for people 35 and below,” Reliant Wealth Advisory founder Michael Walstedt said.