Searching for alpha: Advisers turn to alternatives amidst market volatility
Financial advisers are holding steady amid market turbulence and looking to alternatives to drive future returns, according to the latest Fidante Adviser Markets Survey released last week.
The survey of 174 financial advisers[1] conducted in April during heightened volatility following President Trump’s tariff announcements, reveals that four in 10 advisers are now bearish on both US equities (44%) and Australian equities (39%).
Views were split on what would come next: one in three (31%) expected the Australian and US share market to bounce back within six months, while 29% expected markets to fall further, and 26% expected it to stay about the same.
Since the survey was conducted, global markets have rebounded, with indices such as the Nasdaq now trading above pre-announcement levels following a pause in US-China tariff escalation.
Evan Reedman, General Manager, Fidante Affiliates, said the survey captures how financial advisers responded in real-time to the sharp and unexpected shift in market sentiment.
“The markets reacted strongly to the US tariff announcements, triggering sharp swings in investor sentiment both globally and locally,” Mr Reedman said. “This was an unexpected jolt, but advisers largely stayed the course with the majority expecting client allocations to Australian and US equities to remain steady as they assessed how volatility would play out.”
“Markets have since rebounded and this instinct to remain disciplined has proven correct. It reinforces the value of financial advice in helping investors navigate market uncertainty and to ensure their portfolios are protected across market cycles.”
In November 2024, Fidante’s inaugural Adviser Markets Survey found advisers were most concerned about high equity valuations and inflation. In the latest edition, those fears have been overtaken, with one in two advisers (50%) ranking Trump’s economic policies and tariffs as their main top concern today.
Advisers searching for alternative sources of alpha
Over the past 12 months, the US equity market has been favoured by investors, delivering out-sized returns, driven largely by the strong performance of the ‘Magnificent 7’ tech stocks. As the market corrects, and the US loses some of its lustre, advisers are looking to alternate sources of alpha to drive returns in 2025.
In the next six months, one in three advisers plan to increase allocations to global equity small caps (32%), while a similar proportion are looking to increase their exposure to emerging markets equities (31%), and Australian equity small caps (30%).
Alternative assets are also high on the radar, with advisers looking to increase allocation to infrastructure (29%), private equity (22%), and private credit (21%).
“While following the crowd and investing in the big US tech stocks has driven outsized returns for investors in recent years, looking ahead more active sector and stock selection is going to come to the fore,” Mr Reedman said.
“It is likely global macroeconomic and geopolitical tensions will continue and for investors that means navigating a period of ongoing uncertainty and volatility. Advisers have been quick to look further afield for pockets of opportunities – such as emerging markets, small caps, and private markets – that can provide both diversification and alpha to a client’s portfolio.”
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