SOURCE: Rydex Investments

October 31, 2005 10:09 ET

Advisor Confidence Falls to Lowest Level

Advisors' Optimism on Economic and Stock Market Outlook Falls for Lowest Level Since Inception

ROCKVILLE, MD -- (MARKET WIRE) -- October 31, 2005 -- In October, advisors rated economic and stock market conditions at the lowest levels since the index's inception, according to Rydex AdvisorBenchmarking, Inc., an affiliate of Rydex Investments, which released the October results for the Advisor Confidence Index (ACI) -- a benchmark that gauges advisors' views on the U.S. economy and markets.

Advisor Confidence

The ACI continued to plummet in October. The fears of rising interest-rates coupled with soaring gasoline prices and the breakdown in housing stocks has pushed advisor confidence to the lowest level since inception. The index stands at 108.22, down from 112.78 in September.

The four elements used to calculate the ACI fell in October, with the current economic outlook for the economy decreasing the most -- down 6.28%. A closer look at the components reveal the following:

Current economic outlook        -6.28%
Six-month economic outlook      -4.55%
12-month economic outlook       -0.83%
Stock market outlook            -4.31%
Advisor vs. Consumer Confidence

Of note, the Consumer Confidence Index (CCI), which had increased in August, dropped in September. The CCI stood at 86.60 down 17.99% compared to a 9.03% decrease 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.

"Higher energy prices are a tax on consumers and higher interest rates are the nail in the coffin. The Fed always overshoots on rates and this time will be no different." -- Austin Crowe, T.O. Richardson Company

"The music may have stopped, though even if it has, it may be a while before over leveraged real estate speculators (including some second home investors) and lenders to them realize that there aren't enough chairs. On the positive side, the sooner the froth comes off, the sooner the Fed can ease up, assuming that slower growth also either reduces energy costs, or reduces the ability for businesses to pass along higher energy costs." -- Bill Ramsay, Financial Symmetry Inc

"Investors may have an opportunity to collect some well desired gains in the next couple of months, but don't get too attached to them. It could be a long time before you see them again. The U.S. Stock market appears to be heading into a comatose state in 2006. Consumer spending is going to be a drag on the economy moving forward through the fourth quarter as consumers are forced to deal with higher energy costs. While the job market may be growing it is still at a pace barely strong enough to handle the approximately 150,000 new workers entering the job market each month. At the same time the incomes for these new replacement jobs are substantially lower on average than the jobs that have been lost, in some cases as much as 27% lower. The only shining spot for the economy is quite possibly the boost that should come from reconstruction spending sometime in the first quarter of 2006. However, the inflation pressures that will be triggered will force interest rates higher in the short term, possibly giving us an inverted yield curve and forcing consumer credit costs even higher. In this environment the markets will be spotty at best with only a few sectors showing positive gains. In this environment cash may be king!" -- George Cheatham, American Financial Consultants Inc

"Although a sharp rebound rally wouldn't surprise us in the short term, it is clear based on our research that the transition from a cyclical bull market to a cyclical bear is proceeding in earnest. We await two final nails in the coffin -- credit spreads widening and long-term rates moving a bit higher. We will continue with our very modest long bias until this occurs, though it appears they are likely to occur at some point over the next 2 quarters." -- James Dailey, TEAM Financial Managers

"The breakdown in housing stocks, rising oil prices and rising short-term interest rates are adding up to a potential "Perfect Storm" for consumers." -- Michael Sadoff, Sadoff Investment Management LLC

"We are impressed that despite the pessimistic predictions aired by media, the economy and corporate returns on capital continue to show strength. Equity investing is normally a grinding experience. When stocks are fairly priced and there are few undervalued sectors, one must be content with middling returns. We remain advocates of equities over the long term and encourage investors to invest in one year maturities with fixed income allocations." -- Mickey Cargile, WNB

"The economy seems to be solid even given the short-term affects of Katrina. And it looks like the Government's $60+ billon infusion for Katrina will be a boost to the economy. However, what this means to taxes down the road is still to be determined. The big risks to the economy and markets seem to be on the consumer spending side and how well they weather high commodity prices (passed on to them) and the potential for declines in real estate values. A combination of 3 more Greenspan Fed Meetings, residual waves from the hurricanes, and finally, the seeping in of 2 year long rising energy costs into manufactured goods will take its toll on the economy. I believe the market has not priced in all of that completely, yet." -- Matthew Karpas, Karpas Strategies LLC

"Our clients are cautious and concerned but continue to save for the long term. Inflation concerns are creeping into the planning with some clients thinking they should buy now and save later." -- Pat Raskob, Raskob Kambourian Financial

"Increasing interest rates, cost of war, Katrina, Rita, etc. will present a significant drag. Housing price slow down could leave consumers feeling poor on top of increasing gas and home heating oil prices soaring. Could be a very cold Christmas for retailers. " -- Peter Wheeler, Wheeler/Frost Associates, Inc.

"Government fiscal irresponsibility, the financing of tax cuts, possible housing market crash & mass foreclosures are some items the media will love to talk about on nightly news. This barrage of negative news will likely take it's toll on the financial markets over the next 12-18 months. We are strategically repositioning portfolios to lock in gains and take on a defensive posture." -- Rob Siegmann, Financial Management Group

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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