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Sharp drop in Investor Optimism, acording to UBS/GALLUP Index of Investor Optimism

New York | | Media Releases Americas

Investor optimism plunged in the aftermath of Hurricanes Katrina, reaching its lowest point in two-and-a-half years. Currently at 34, the UBS/Gallup Index of Investor Optimism is 27 points lower than last month, when the Index was at 61. Energy costs appear to be weighing heavily on investors' minds and dampening their outlook of the investment climate.

Hurricanes Shake Investor Optimism

Energy Prices Continue to Worry Investors

Investor optimism plunged in the aftermath of Hurricanes Katrina, reaching its lowest point in two-and-a-half years. Currently at 34, the UBS/Gallup Index of Investor Optimism is 27 points lower than last month, when the Index was at 61. Energy costs appear to be weighing heavily on investors' minds and dampening their outlook of the investment climate.

"Investors were clearly jolted by the impact of Hurricanes Katrina and Rita, the spiraling rebuilding costs and the implications for oil supply and distribution," said Maury Harris, UBS Chief US Economist. "Having also lived with high energy prices this summer, investors now view rising costs as part of a longer-term trend, rather than a short-lived phenomenon. "

The great majority of investors say the current energy prices are hurting the U.S. investment climate. Fifty-four percent say the investment climate is hurt "a great deal," while 34 percent say it is hurt a "moderate amount." As compared with last year, investors now believe that the current rise in gas prices represents a more permanent trend. Seventy-one percent of investors believe the rising prices are part of a permanent trend, compared with 56 percent in May of 2004.

At the time of the survey, the average price of gas experienced by investors was $2.99 a gallon. Investors expect that three months from now, the average price will be $3.09. On this matter, the views of investors varied considerably. Forty-seven percent expect that prices will rise in the next three months, by an average of $.55 a gallon. Forty percent of investors expect prices to decline by an average of $.39 cents a gallon. Another 12 percent of investors expect no change. This uncertainty is undoubtedly due to the unpredictability of gas prices and conflicting predictions in the media. Interestingly, women polled were considerably more pessimistic about gas prices, expecting on average a $.19 per gallon increase over the next three months, than men polled, who expected only a $.04 per gallon increase.

Investors say the impact of higher energy prices has been felt personally as well as in the markets.
Fifty-one percent of investors say they have suffered financial hardship this year because of the price increases, compared with 42 percent in August of 2004.
Seventy-eight percent of investors say they have curtailed spending in at least one of four areas as a direct consequence of higher energy prices: 66 percent are curtailed their driving, 57 percent cut back on general spending, 49 percent cut back on vacation, and 31 percent reduced their use of fans and air conditioners.

This month's survey also showed a significant drop in the percentage of investors who think now is a good time to invest in the financial markets, from 59 percent who felt that way last month to 51 percent now. The last time investors were this pessimistic was in March 2003. Other issues weighing on investors' minds are concerns about economic growth and inflation.

These findings are part of the 90th Index of Investor Optimism, which was conducted September 1 to September 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 a leading financial firm, combining financial strength with a reputation for innovation and a global culture that embraces change.

UBS is one of the world's largest wealth managers, a premier investment banking and securities firm, and one of the largest global asset managers. In Switzerland, UBS is a market leader in retail and commercial banking.
Headquartered in Zurich and Basel, UBS employs around 69,000 people, and has operations in over 50 countries and in all major financial centers.

Additional information about the Index of Investor Optimism can be found at

month

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

December

79

104

52

88

106

174

141

151

November

69

93

41

84

130

148

125

October

62

69

29

86

132

139

124

September

34

74

54

60

50

147

160

147

151

August

61

77

61

52

76

160

149

July

58

88

54

46

74

143

166

June

54

95

77

72

85

149

146

160

152

May

50

71

42

90

90

155

163

April

52

73

66

89

81

140

168

March

74

85

5

121

82

150

151

161

February

82

97

9

92

77

168

167

158

January

76

108

38

115

96

178


New York, September 26, 2005
UBS