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Investor sentiment continues slow recovery aided by moderating gas prices.

New York | | Media Releases Americas

Investors React Positively to Nomination of Ben Bernanke as New Fed ChiefHoliday Spending Predictions Suggest Little Change this Year

Investor optimism continues its modest recovery from its post September lows following the hurricanes in the Gulf region. After rebounding last month from a two-and-a-half-year low, the UBS/Gallup Index of Investor Optimism is now at 50, up three points from October and 16 points from September. More investors than last month consider the economy in an expansion or recovery and moderating gas prices are aiding that recovery. Investors reacted positively to the nomination of the new Federal Reserve Chief this month but attribute little economic influence to the Fed. Investors were also questioned this month about their likely holiday spending and most predicted they would spend about the same as last year.

Investor evaluations of economic conditions have improved since last month. Forty percent say the economy is in an expansion or recovery, up seven points from last month. Fifty-nine percent characterize the economy as in a slowdown or a recession, including 40 percent who say it will be at least two years before the economy begins to recover.

Another indication of some improvement in the investment climate is that 56 percent of investors say now is a good time to invest in the financial markets, up five points from last month. In the first quarter of this year, an average of 62 percent said it was a good time to invest. That dropped to 57 percent in the second quarter, then fell to 51 percent in September and October, before recovering this month.

One reason for the more positive perceptions may be the moderation of gas prices. Last month 80 percent of investors said the price of energy was hurting the investment climate "a lot." That number is down to 71 percent this month.

"The economy is clearly in a period of mild recovery as moderating gas prices bring some relief." said Mike Ryan, Head of UBS Wealth Management Research.

Investors have reacted generally positively to the nomination of Ben Bernanke as the new Chairman of the Federal Reserve Board. Almost half, 47 percent, say that appointment is either "excellent" (12 percent) or "good" (35 percent), 23 percent say "fair," and just eight percent say Bernake was a "poor" choice. Another 22 percent expressed no opinion.

Interestingly, despite the widespread publicity surrounding the appointment of the new Fed Chairman, few investors attribute much economic influence to the Fed. Only 10 percent say the Fed has the most influence on the economy, while most investors say there are other factors with greater influence. Thirty-seven percent say that government policies passed by the congress and the president have a greater impact, 33 percent mention the activities of business and industry in the United States, and 16 percent cite the international economy.

As for their own portfolios, just 29 percent say the Fed's interest rate policy has either an extremely or very important impact, while 26 percent say it has little to no impact. Another 44 percent say the Fed's policy is moderately important. In looking to the future, two-thirds of investors, 66 percent, expect the Fed to continue raising interest rates, while 21 percent expect the Fed to keep interest rates steady, and three percent predict a decline.

On a completely separate issue, the poll finds investors showing little change in their holiday spending from two years ago. More investors say they will spend less this year (24 percent) than last, while 9 percent expect to spend more. Typically Americans say they will spend less each year than last, and the pattern measured this year is similar to what was measured in 2002 and 2003. Sixty-six percent say they will spend the same this year as last. The actual projected level of spending this year is an average of $992 per person, down $23 per person measured two years ago, well within the poll's margin of error. These results suggest overall little change in spending from previous years.

The economic dimension continues to show modest improvement, up six points each of the last two months and is now at -2. The negative score indicates that investors overall remain slightly more pessimistic than optimistic about the investment climate.

The personal dimension has varied within a relatively narrow range over the past eight months, from a high of 55 to a low of 48. The current reading is 52, down three points from last month.

These findings are part of the 92nd Index of Investor Optimism, which was conducted November 1 to November 20. 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 801 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 one of the world's leading financial firms, serving a discerning global client base. As an organization, it combines financial strength with an international culture that embraces change. As an integrated firm, UBS creates added value for clients by drawing on the combined resources and expertise of all its businesses.

UBS is the world's largest wealth manager, a top tier investment banking and securities firm, and one of the largest global asset managers. In Switzerland, UBS is the market leader in retail and commercial banking.

UBS is present in all major financial centers worldwide. It has offices in 50 countries, with 39% of its employees working in the Americas, 38% in Switzerland, 16% in Europe and 7% in the Asia Pacific time zone. UBS's financial businesses employ more than 70,000 people around the world.



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

50

69

93

41

84

130

148

125

October

47

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, November 28, 2005
UBS