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UBS/Gallup Index of Investor Optimism Reaches New Low for the Year at 53
INVESTOR OPTIMISM DECLINES FURTHER Seven in Ten Investors Say Real Estate Conditions are Getting Worse
Investor Optimism fell in August to a new low for the year, dropping two points to 53. Since January, the Index has been on a steadily declining trend, dropping 40 points. The UBS/Gallup Index of Investor Optimism is conducted monthly and had a baseline score of 124 when it was established in October 1996.
One key issue of growing concern to investors is the residential real estate market. Fifty-six percent of respondents rate conditions in the real estate market as "only fair" (44 percent) or "poor" (12 percent), a significant jump from the 46 percent who held these views in June and July. Additionally, 70 percent of investors believe that conditions in the real estate market are getting worse, up from 63 percent in June. Investor sentiment toward investing in real estate assets nationwide has also fallen. In August, 50 percent of investors said that now is a good time to invest in real estate related assets nationwide, down from 55 percent in June.
The vast majority of investors polled, 94 percent, continue to view energy prices as harmful to the investment climate. Respondents also believe that gasoline prices will continue to rise somewhat over the next three months. Investors are also greatly concerned about the unsettled geopolitical environment with 85 percent responding that they believe current international tensions are hurting the investment climate. Additionally, 75 percent are concerned about the Federal budget deficit and 72 percent worry about the danger of increased inflation.
"The drop in confidence in the real estate market reflects the economic data for that sector and suggests that investors are feeling the pinch in their local markets," said Anne Briglia, Senior Fixed Income Strategist, UBS Wealth Management Research. "Although we have seen gasoline prices stabilize recently, investors are clearly worried about the implications of international tensions on future energy prices."
With the "back-to-school" shopping season underway, investors were polled about their spending plans. Although only one-third of investors expect to shop for "back-to-school" items, 36 percent of those who do expect to spend more than they did last year while 11 percent expect to spend less. Thirty-nine percent of those shopping for "back-to-school" plan to spend $300 or less, while one in four plans to spend more than $1,000.
Investors' outlooks on their personal investments have also dipped. The Personal Dimension of the Index fell three points to 54 from 57, indicating that investors are less optimistic about their own portfolios than they were a month ago. At the same time, the Economic Dimension of the Index increased 1 point to -1 in August from -2 in July and +1 in June suggesting that investors as a whole are essentially neutral about the economic outlook over the next 12 months.
These findings are part of the 99th Index of Investor Optimism, which was conducted August 1-17, 2006. To track and measure Index changes on an ongoing basis, new samplings are taken monthly. Dennis J. Jacobe, Chief Economist 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.
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New York, August 28, 2006
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