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Clients' risk appetite muted in face of mounting concerns

Concerns about the U.S. presidential election and economic uncertainties are driving clients to up cash reserves, advisers say.

Allocations to equities and bonds — both domestic and international — fell, according to the latest reading of our monthly Global Asset Allocation Tracker, which polled 307 advisers.

Planners say clients’ concerns have been mounting in recent weeks. From the outcome of the U.S. presidential election to the future trajectory of Brexit and the direction of interest rates, clients – and their advisers – have numerous worries to keep them up at night.

The New York Stock Exchange
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Monday, Aug. 22, 2016. U.S. stocks fluctuated after erasing an early slide, as a rally in drugmakers spurred by deal activity offset declines in commodity shares led by falling crude-oil prices. Photographer: Michael Nagle/Bloomberg

"We are very cautious of the market conditions at this time," a planner says. "We believe the U.S. market valuations are slightly stretched, and don't have a lot of confidence in the international markets to invest a lot of capital at this time."

Client risk appetites were "muted," and many were "trying to play it safe," according to advisers.

Global Asset Allocation Tracker November edition
Punished by the plunge in the energy sector, some advisers await a rebound that can take advantage of master limited partnerships’ tax status.
September 28

A wealth manager reports having a gloomier outlook: "We're heading towards a bubble, which will burst."

The result has been that clients are reluctant to invest more, even though some buying opportunities may exist in emerging markets. Cash positions within portfolios have increased, advisers report.

"Everyone appears to be in holding pattern," a planner says.

Another planner says that, although current market conditions leave many with a bearish outlook, perspectives may shift into bull territory once the presidential election is over.

Still, even this planner, who was more upbeat than others, concluded on a cautious note: "We want to be more defensive until we see how it plays out."