Advisors expecting higher interest rates, online survey suggests

(March 13, 2003) The majority of Canada’s financial advisors believe the country’s central bank will raise interest rates over the next three months, according to a survey conducted by The ADVISOR Group. Three-quarters of those responding to the online poll said they expect higher rates, compared to 52% when the same question was asked last month.

The Bank of Canada raised its key lending rate by 25 basis points to 3% on March 4. Yesterday, Governor David Dodge strongly hinted at further increases, noting that Canada’s inflation rate remains above the central bank’s target range. The next rate announcement is scheduled for April 15. Some economists predict the bank’s lending rate could reach 4% by year’s end.

The ADVISOR Omnibus survey also found little change in expectations regarding stock market performance, despite heightened uncertainty over the Iraq situation. Nearly 40% of advisors questioned said they expect stocks to remain the same over the next three months while 46% believe stocks will rise. Last month, 48% predicted a stock increase and 34% said prices would remain unchanged.

The outlook on bond performance weakened slightly this month. Nearly 60% of advisors expect bonds to fall over the next three months, compared to 44% in February.

Asked for their current recommended asset allocation for an unrestricted portfolio, advisors chose, on average, 57% equities, 33% fixed income and 10% cash, virtually the same as last month.

Advisors were slightly more optimistic about client base growth this month. Nearly 84% said they expect their client base to increase over the next 12 months, up from 79% in February. Ninety-four per cent of respondents sell mutual funds, 78% sell insurance and 17% sell securities.

Three hundred advisors responded to the March poll, promoted in Advisor.ca’s daily e-mail bulletins. Similar surveys will be conducted each month and the results will be compared to past polls.

Are the results of this month’s poll on par with your expectations? Are your fellow advisors on the mark, or missing it entirely? Share your opinions in the “Free for All” forum of the Talvest Town Hall on Advisor.ca.

Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca