Financial advisors are jumping on the bull market bandwagon

Call it a bullish outlook when only 11{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5} of financial advisors expect the S&P 500 Index to finish the year in negative territory.

A late February survey of 705 advisors sponsored by technology platform InspereX shows 53{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5} of respondents expect the S&P to gain at least 10{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5} in 2023, while 36{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5} expect the market to be flat for the year.

The general outlook includes 51{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5} of advisors saying that 2023 will be the start of a prolonged bull market for equities. That’s a strong endorsement considering that 2022 saw both stocks and bonds finish in negative territory for the first time ever.

So far this year, the markets have been in a rallying mood, with the S&P up 7.5{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5} on the heels of an 18{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5} drop last year. Bitcoin has also found some fresh momentum, cresting the $30,000 mark for the first time since June 2022.

According to Morningstar, large-growth led all style boxes in the first quarter with an 11.6{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5} gain. The foreign large-growth category rose 9.6{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5}, and foreign large-value was up 7.4{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5}.

As Morningstar analyst David Carey detailed, some of the strongest performers early this year are rebounding from a rough 2022.

“Managers who held the hardest-hit names in 2022 tended to come out on top in the first quarter,” he said. “After falling more than 31{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5} in 2022, the Morningstar U.S. Tech Index finished the quarter up 22.5{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5}.”

Perhaps not surprisingly, the Morningstar U.S. Banks — Regional Index plummeted 23.5{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5} in the first quarter.

By sector, information technology has led the way this year with a 20.9{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5} gain, followed by consumer services, up 17.9{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5}, and consumer discretionary, up 15.6{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5}.

Financials holds the title of worst-performing sector with a 5.3{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5} decline, followed by energy, down 4.9{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5}, and health care, down 3.5{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5}.

Broken down by asset class, developed international stocks gained 8.9{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5}, gold was up 8{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5} and U.S. large-cap stocks rose 7.4{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5}

The worst-performing asset class over the first three months of the year was commodities, which were down 6.3{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5}, followed by cash with a 1{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5} gain and real estate with an increase of 1.7{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5}.

The InspereX advisor survey shows that 48{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5} of advisors expect equities to be the best-performing asset class this year, while 17{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5} cited bonds, 9{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5} said cash, and 8{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5} said alternative investments.

Only 1{9f99fe44fce1aa3c813d0a0ce4da2fbea8a5a58e9d85c4a2927dd8140cb676b5} of advisors said they expect cryptocurrencies to be the best-performing asset class this year.

“If 2022 wasn’t challenging enough for stock market investors, this year has been a gotcha market because every time you start to feel confident, volatility reappears,” Chris Mee, head of market-linked products distribution at InspereX, said in a statement.

“It shouldn’t be a surprise given all of the macro factors in play, including inflation, rising rates, and even more recently a black swan event in banking, but many advisors tell us they believe there is potential for reasonable market gains this year,” he said. “Many believe we are heading into a new bull market. The question is, do their clients share their faith in the market after last year left so many clients more worried more than ever about volatility?”