Although financial advisers acknowledge that the market and economy face a challenging environment, a scant 1% believe that a recession is very likely next year, and only 26% say that 10% or fewer of their clients have expressed fears of a recession, according to an OppenheimerFunds survey.

And according to OppenheimerFunds Economist Brian Levitt, their beliefs are well-founded. A deep recession isn’t likely, he said, but there will be a mid- to short-lived economic slowdown.

Nonetheless, financial advisers still have high expectations for returns in 2008, with 82% saying it’s still feasible for one particular asset class, such as international or growth stocks, to deliver double-digit returns in 2008.

Levitt agreed that this is possible. “One of our key themes for 2008 is ‘global for the long term,’ and we share the view that there are great investment opportunities around the world. It’s good to see that advisers are thinking broadly across a mix of asset classes.”

Of their concerns for 2008, 76% cited real estate prices, 73% the credit crunch and 70% the presidential election.

Of the 63% who said they will adjust their clients’ portfolios, 22% plan to shift toward bonds, 19% to money market funds and 14% to other investment products, including separately managed accounts, real estate and exchange-traded funds.

As to which demographic group will be their most valuable target in 2008, 49% said women and 43% Generation X. “While advisers told us in 2006 Boomers were the most valuable group to target, this year they indicated women investors as the group with the most potential,” Levitt said.

As to which issues or developments will have the biggest impact on their business in the coming year, 58% said market performance, 54% said retiring Baby Boomers and 49% said both the real estate bubble and the credit crunch. Another 57% said they will spend most of their time in 2008 discussing retirement with their clients.

Should a recession occur, 28% said they would shift assets toward more fixed income holdings, and if the dollar’s value should decline much further, 40% said they would move client assets toward more international exposure.

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