Financial advisors are jumping on the bull market bandwagon

Call it a bullish outlook when only 11% 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% of respondents expect the S&P to gain at least 10% in 2023, while 36% expect the market to be flat for the year.

The general outlook includes 51% 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% on the heels of an 18% 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% gain. The foreign large-growth category rose 9.6%, and foreign large-value was up 7.4%.

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% in 2022, the Morningstar U.S. Tech Index finished the quarter up 22.5%.”

Perhaps not surprisingly, the Morningstar U.S. Banks — Regional Index plummeted 23.5% in the first quarter.

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

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

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

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

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

Only 1% 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?”