An overwhelming majority of financial advisors believe the US economy will avoid a recession in 2019 (93%) and that U.S. stocks will end the year higher (88%), according to a poll conducted by Ned Davis Research (NDR). While the outputs are mostly in line with NDR's outlook for the second half of 2019, financial advisors may hold overly positive expectations for the S&P 500. 

According to Ed Clissold, Chief U.S. Strategist at NDR, the S&P 500 will likely experience gains of 3-5% for the second half of 2019. A majority of advisors (62%) expect the S&P 500 to experience gains greater than 5%, with the largest group of respondents (35%) expecting 5%-10% gains, putting the S&P 500 at a range of 3,092-3,239.^[1]

The overwhelming optimism from advisors on US markets is also out of sync with sentiment indicators. The NDR Daily Trading Sentiment Composite shows that investors have moved away from extreme pessimism in June but still remain skeptical about markets.

"Financial advisors clearly believe this rally has room to run, but sentiment indicators show that optimism hasn't trickled down to their clients or the market broadly," said Ed Clissold. "We believe advisors need to pull expectations back just a bit. We do expect gains for the second half of this year, but they may be a bit more measured than some are hoping for."

On Federal Reserve rate cuts, advisors are split on when the first rate cut will take place. While 85% of advisors believe the Fed will cut rates by 25 or 50 basis point in either July or September, 39% anticipate the first rate cut of 25 basis points in July and 36% expect an initial cut of 25 basis points won't take place until September. Although futures markets have priced in a 100% chance of a 25 basis point cut in July, 15% of advisors believe that the Fed will not cut rates in 2019.

When it comes to a recession, the outlook from advisors remains positive, with 60% of advisors not expecting a recession until 2021 or beyond. Still, a significant number of respondents (40%) expect the US will experience a recession this or next year.

"It's interesting to see how out of sync financial advisors are from many of the wirehouses, which have become increasingly negative about US stocks and the economy over the past few weeks," said Joe Kalish, Chief Global Macro Strategist. "Our NDR indicators and models don't foresee a recession on the horizon."

"In recent discussions with our advisory clients, we've been hearing a fairly optimistic tone," said Amy Lubas, Advisory Strategist. "The biggest challenge advisors have is determining when to deploy cash into the stock market."

The poll was conducted on June 24, 2019 with 400 U.S. financial advisors.