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Advisor Confidence Remains Upbeat in August

Fourth Straight Month of Advisors Optimism on Economic and Stock Market Outlook

Advisors' economic and stock market outlook improved for the fourth month in a row in August, according to Rydex AdvisorBenchmarking, Inc., an affiliate of Rydex Investments, which released the August results for the Advisor Confidence Index (ACI) -- a benchmark that gauges advisors' views on the U.S. economy and markets.

Advisors' Confidence Improves Further

The Advisor Confidence Index, which had increased in three consecutive months, improved further in August. Advisors feel more positive and have a sense of economic stability. In August, the Advisor Confidence Index increased 0.79% to 123.97.

Short-term outlook for the economy and stock market improved in August, with their current outlook for the economy increasing the most -- up 2.16%. Looking further out, advisors cited rising fuel costs as a major concern for them, and, as a result, were less positive about the future. A closer look at the components is below:

Monthly Change in the Components of
the Rydex Advisor Confidence Index
(Since June)
Current economic outlook        +2.16%
Six-month economic outlook      +1.81%
12-month economic outlook       -0.90%
Stock market outlook            -0.12%

Advisor vs. Consumer Confidence

Of note, the Consumer Confidence Index (CCI), which had increased in June, dropped in July. The CCI stood at 103.20 down -- 2.46% compared to a 5.63% increase for the advisor index.

Notable Comments From Participating Advisors

Most of the advisors who participate in the index have elected to have their names made available to reporters who would like to interview them about their economic sentiments. AdvisorBenchmarking can facilitate such interviews for reporters.

"The economy seems to be a lot stronger than many thought, though higher interest rates should start to bite into it a bit. A big question is whether the Federal Reserve will overshoot in raising rates if the real estate bubble doesn't pop soon. Of course they may also view it as inevitable and may be trying to get as much dry powder as they can for cushioning the blow to the overall economy."

-- Bill Ramsay, Financial Symmetry Inc

"Despite media gloom over the latest disaster de jour (gas prices), the energy cost per dollar of GDP has dropped dramatically over the last 20 years; the housing bubble is easing and unemployment figures are improving steadily, as they have for more than a year and a half. U.S. markets are resting."

-- Curt Weil, Weil Capital Management, LLC

"The only thing that can change my outlook for the economy and stock market is the escalating cost of oil. As I've been saying for months, the rising cost of oil is a hidden tax that will have wide reaching effects if the price doesn't level off or go down a little. The cost of harvesting crops, shipping all types of merchandise, transportation, etc. might hurt back to school sales, Christmas sales, etc."

-- David Cramer, Cramer Financial Services

"I find it difficult to expect the U.S. Markets as well as the U.S. economy to growth with the constant rise in crude oil prices. The negative effect of rising crude oil prices has yet to be reflected in the current forecast for economic growth."

-- Gary Clemmons, Texas Capital Management

"We continue to believe that cash is the high risk allocation."

-- John Ferguson, Ferguson Asset Management

"The US economy is in a precarious position, one that is not likely to change for the foreseeable future. While corporate profits have been largely climbing due to productivity gains, favorable tax and monetary policy this ship has about run its course. The higher fuel costs of today's world will severely cut into consumer spending over the next six months. In this environment, today's investor must look increasingly to the international markets for gains as well as certain sectors of the U.S. economy that can maintain pricing power."

-- George Cheatham, American Financial Consultants Inc

"The strength of the economy is not something that many average investors are aware of or thinking about. In the long-term the economy drives the market and when the message of our current economic strength sinks in it could be good for the markets. Fourth quarter returns could be strong, much like 2004."

-- Mark Danielson, Intelligent Financial Strategies

"The markets are showing important divergences that suggest that an important cyclical top is being developed. We appear to be in a blow-off phase in small caps and housing-related (may actually have already peaked) segments of the markets. Blue chips have largely been absent from this move, which is an important divergence. Although momentum could take us a bit higher, investors would be wise to use strength to reposition to an ultra conservative allocation."

-- James Dailey, TEAM Financial Managers

"In spite of solid earnings news for the last four weeks, markets have not gone up. There is a reason that markets do not go up when good news comes out... bad news is coming and markets will not weather the storm well in the short term."

-- Ken Graves Capital Research

"The Federal Reserve will not stop raising interest rates until they see economic data that the economy is slowing down. By that time higher short-term interest rates will likely cause a financial crisis or a recession."

-- Michael Sadoff, Sadoff Investment Management LLC

"The economy continues to outperform the dreary expectations of the financial news media. We continue to believe the economy is much stronger that is being reported. Corporate earnings growth rates and returns on invested capital should remain strong. Oil prices will not affect the economy until you see lines at the gas pump. However, the rising price of energy is depressing the returns on equities in the short term. We expect seasonal weakness into mid to late August providing an excellent buying opportunity for equities. Reduce all durations in your fixed income allocations and hold only short term instruments."

-- Mickey Cargile, WNB

"Our clients seem to be feeling more positive. Could be the combination of a sense of stability as well as coming back from a positive experience in their vacations."

-- Pat Raskob, Raskob Kambourian Financial

"Higher interest rates and higher oil prices drive up the cost of capital, thereby reducing expected future market prices."

-- Paul Byron, Private Wealth Advisors, Inc

"When the returns YTD were negative after the first half, we were not concerned and anticipated a month like July 2005 to hit, like lightning. You can't time it, you just have to be diversified, so you can participate whenever and wherever it occurs. We were not concerned, as the economy is doing well, and that is what ultimately drives the stock markets."

-- Rob Siegmann, Financial Management Group

"Despite increases in the Fed Funds Rate and short-term interest rates in general, the consumer is healthy and corporations are spending. Chairman Greenspan is doing his part to keep inflation in check and the U.S. keeps adding a steady stream of new jobs. There should be more hope than pessimism for the near and mid-term future of stock prices. We could see a 5-8% rally in prices by year end."

-- Terry Siman, Executive Financial Services Inc.

About Rydex AdvisorBenchmarking, Inc., an Affiliate of Rydex Investments

Rydex AdvisorBenchmarking is a research and analysis center focused on the registered investment advisor (RIA) marketplace. Every year through its survey web site, www.AdvisorBenchmarking.com, the firm conducts multiple surveys on advisors, covering a host of business-management and investment-management practices. The findings and analysis of the data are then released to the marketplace as annual studies, quarterly research notes and monthly newsletters. The service is aimed at helping advisors grow and enhance their firms by comparing how their businesses fare against other advisors. Advisors also learn best practices of the most successful advisors in the business. AdvisorBenchmarking is an affiliate of Rydex Investments.

The analysis on Rydex AdvisorBenchmarking.com is based on the number of completed surveys and reflects only information from those surveys. This information is intended to be general, and these overviews are no substitute for professional, legal or consulting advice. This information should not be construed as advice from Rydex Investments or any of its affiliates.

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