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Investor Optimism continues to decline, according to UBS index

| Media Releases Americas

Majority of Investors Believe Outsourcing Bad for the Economy But Not Personally Concerned about Loss of Job

NEW YORK, April 26, 2004 - Optimism continued to slide this month, with investors weighing in about inflation and their ability to maintain income, according to the UBS Index of Investor Optimism, a joint effort of UBS and the Gallup Organization.

Currently at 73, the overall Index again dropped 12 points this month, down from 85 in March. Conducted monthly, the Index had a baseline of 124 when it was established in 1996.

The drop can be attributed to an 8-point decrease in the Index's personal dimension, which measures investors' confidence in their ability to maintain income and reach short-term and long-term investment targets, all of which scored lower this month. Average expectations for return during the next 12 months dipped to 10.4 percent from 12.7 percent in March, yet two-thirds of investors believe now is a good time to invest in the financial markets. Of those surveyed:

  • 57 percent remain optimistic about prospects for short-term return, down four percentage points from last month and up five from a year ago; 67 percent are optimistic about prospects for long-term return, down three points from last month as well as a year ago;

  • 63 percent report they are optimistic about their ability to maintain income in the near-term, down five points from last month and four points from a year ago;

  • Portfolio returns in the past 12 months averaged 9.3 percent, down sharply from 14.0 in March, the highest average return since September 2000.

The Index's economic dimension, which measures investors' sentiment on economic growth, unemployment, stock market performance and inflation, fell four points. Investor confidence in the stock market's performance, 55 percent, and inflation, 38 percent, both dropped this month, 3 points and 7 points respectively. Additionally, optimism about economic growth remained unchanged at 54 percent this month. In the area of unemployment, investors were slightly more upbeat with 43 percent reporting optimism in the jobs market.

According to the Index, 59 percent consider the economy to be in either a sustained expansion or recovery, compared with 57 percent last month. Conversely, 40 percent believe the economy is either in a slowdown or recession, compared with 42 percent last month.

This month, investors were asked about the outsourcing of jobs to foreign countries and, the vast majority, 88 percent, reported they have heard a great deal, 56 percent, or a moderate amount, 32 percent, about this issue, and 66 percent think it is generally bad for the U.S. economy. Interestingly, 64 percent report that they are not worried that outsourcing will hurt them personally but almost a quarter of investors, 23 percent, say they are either very worried or somewhat worried that they or someone in their household will lose a job to outsourcing.

Notably, investors support more protectionist measures to stem outsourcing: 76 percent believe a requirement that all government-related jobs be performed in the United States would be effective; 72 percent back the creation of tax penalties for companies that move jobs out of the country; and 67 percent espouse the use of tariffs on goods produced overseas to discourage manufacturers from moving plants outside the United States. However, 76 percent believe that both improving the quality of education in this country and also reducing the cost of healthcare benefits would discourage outsourcing.
Investors were also asked about the Federal Reserve's interest rate policy, and 49 percent approve and 8 percent disapprove of the Fed's current policy.

These findings are part of the 72st Index of Investor Optimism, which was conducted April 1 to April 18. To track and measure Index changes on an ongoing basis, new samplings are taken monthly. Dennis J. Jacobe, research director for Gallup, said the sampling included 802 investors randomly selected from across the country. For this study, the American investor is defined as any person who is head of a household or a spouse in any household with total savings and investments of $10,000 or more. Nearly 40 percent of American households have at least this amount in savings and investments. The sampling error in the results is plus or minus four percentage points.

For more than 60 years, the Gallup Organization has been a recognized leader in the measurement and analysis of people's attitudes, opinions and behavior. While best known for the Gallup Poll, founded in 1935, Gallup's current activities consist largely of providing marketing and management research, advisory services and education to the world's largest corporations and institutions.

UBS is the world's leading wealth management business. In the U.S., it is the third largest private client business with a client base of more than 2 million investors. Its American network of more than 7,700 financial advisors manages roughly 634 billion Swiss francs in invested assets and provides sophisticated services through consultative relationships with affluent and high net worth clients. In Switzerland and internationally, UBS has more than 140 years of private banking experience, an extensive global network of 164 offices and nearly 701 billion Swiss francs in invested assets. More than 3,200 client advisors provide a comprehensive range of services customized for wealthy individuals, ranging from asset management to estate planning and from corporate finance to art banking.

Additional information about the Index of Investor Optimism can be found here.


UBS Index of Investor Optimism overall trend

OVERALL INDEX

04 Apr

73

04 March

85

04 February

97

04 January

108

03 December

104

03 Nov

93

03 October

69

03 Sep

54

03 Aug

61

03 July

54

03 June

77

03 May

42

03 Apr

66

03 March

5

03 February

9

03 January

38

02 December

52

02 Nov

41

02 October

29

02 Sep

60

02 Aug

52

02 July

46

02 June

72

02 May

90

02 Apr

89

02 March

121

02 February

92

02 January

115

01 December

88

01 Nov

84

01 October

86

01 Sep

50

01 Aug

76

01 July

74

01 June

85

01 May

90

01 Apr

81

01 March

82

01 February

77

01 January

96

00 December

106

00 November

130

00 October

132

00 September

147

00 August

160

00 July

143

00 June

149

00 May

155

00 April

140

00 March

150

00 February

168

00 January

178

99 December

174

99 November

148

99 October

139

99 September

160

99 August

149

99 July

166

99 June

146

99 May

163

99 April

168

99 March

151

99 February

167

98 December

141

98 September

147

98 June

160

98 March

161

97 December

151

97 September

151

97 June

152

97 February

128

96 November

125

96 October

124