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Investor Optimism Surges to Match its High Point for the Year
UBS/Gallup Index of Investor Optimism at 93 - Highest Level since January Energy Price Concerns at Lowest Level Since Measurement Began in March 2004
Investor optimism surged 14 points to reach its highest point since January, according to the November UBS/Gallup Index of Investor Optimism. The Index has risen 40 points over the past three months and currently stands at 93. In August, optimism hit a low for the year at 53. The Index is conducted monthly and had a baseline score of 124 when it was established in October 1996.
Investor concerns about high energy prices continued to decline in November as the percentage of investors saying they believe energy prices are hurting the investment climate "a lot" fell to 54 percent - its lowest level since measurement began in March 2004. As recently as August, 78 percent of investors said energy prices were hurting the U.S. economy "a lot." Currently, approximately the same percentage of investors considers the federal budget deficit (53 percent) and international tensions (52 percent) as harmful to the investment climate as energy prices.
With the November increase in the Index came increases in both the Personal and Economic Dimensions of the Index. The Personal Dimension, which measures people's optimism about their own portfolios over the next 12 months, increased six points to 68 in November and is up 14 points since August. The Economic Dimension, which measures people's optimism about the economy over the next 12 months, increased eight points in November to reach 25 - its highest level since June 2004. Investors as a whole have gone from being essentially neutral on the economy just three months ago to being somewhat optimistic about economic outlook over the next 12 months.
"The recent stabilization in gasoline prices has clearly impacted investors' outlook on the economy as more money has been kept in investors' pockets. The continued stock market rally is also fueling investor optimism, offsetting worries about other sectors, especially the housing market," said Mike Ryan, Head of UBS Wealth Management Research Americas.
Investors' perceptions of the U.S. economy also improved in November as the percentage of investors saying we are experiencing a "recovery" or an "economic expansion" rose to 46 percent, up from 38 percent in September to 43 percent in October. Another 41 percent say the economy is in a "slowdown," down from 44 percent who held this view in October. Only one in ten investors believes the U.S. is in a recession. This data suggests that investors increasingly believe that the U.S. economy is headed towards a so-called "soft landing."
Although investors are more optimistic about the economy overall, they remain concerned about conditions in the residential real estate market. Most investors seem to believe that the real estate market will continue to worsen before improving, both nationally and in their local communities. Sixty-four percent of investors rate conditions in today's residential real estate market nationwide as "only fair" (45 percent) or "poor" (19 percent), up from 59 percent in October. Seventy percent say economic conditions in the residential real estate market nationwide are getting worse, up slightly from October. In contrast, only 25 percent say conditions are improving, slightly lower than last month.
When considering their local real estate markets, nearly one in four investors (23 percent) rate conditions in their local residential real estate market as "poor," up from 18 percent who held this view last month and 16 percent in September. Another 36 percent rate conditions in their local residential real estate market as "only fair." Six in ten investors (59 percent) say conditions in the local residential real estate market are getting worse - the same as the percentage of investors who felt this way last month. In this regard, it is unsurprising that three in four investors believe that the potential for a real estate crash in some local markets is hurting the current investment climate.
These findings are part of the 104th Index of Investor Optimism, which was conducted November 1-16, 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 800 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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Additional information about the Index of Investor Optimism can be found at
New York, November 27, 2006
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