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Investor Optimism remains buoyant as 2006 come to a close

New York | | Media Releases Americas

Two in Three Investors Say Now Is a Good Time to Invest Investors Generally Optimistic about Party Shift in Congress

Investor optimism held steady at one of its highest levels for 2006 at 90, according to the December UBS/Gallup Index of Investor Optimism. The Index declined just three points from its level of 93 in November but remains higher than during nine of the twelve months of 2006. The Index is conducted monthly and had a baseline score of 124 when it was established in October 1996.

Reacting to November's Congressional elections, investors responded somewhat positively to the shift from a Republican to a Democratic Congress. Thirty-eight percent of investors believe the shift will positively affect the investment climate, while 28 percent believe the change will have a negative impact. A further 32 percent believe the change in control will have no impact at all.

Investors are increasingly bullish on the financial markets, with two in three investors (67 percent) saying that now is a good time to invest in the financial markets. This is up sharply from the 57 percent who held this view last month and is the highest percentage of investors feeling this way since February 2004.

Despite their faith in the financial markets, investors seem less keen on the residential real estate market. Investor sentiment suggests that residential real estate market conditions are continuing to deteriorate and have not reached bottom. Seven in ten investors say economic conditions in the residential real estate market nationwide are getting worse, compared with only 23 percent who believe they are getting better. It is therefore not surprising that nearly three in four investors (72 percent) believe that the potential for a housing or real estate crash in some local markets is hurting the current investment climate "a lot" or "a little."

"Although investors have concerns about the real estate market, the continued rally in the equity markets fueled by solid corporate earnings is driving investors' positive feelings about the current investment climate," said Robin Miranda, Associate Strategist, UBS Wealth Management Research Americas.

High energy prices continued to top investor concerns in December with 55 percent saying they believe energy prices are hurting the current investment climate "a lot" - essentially the same as the 54 percent who felt this way in November, but significantly lower than the 78 percent who held this view in August 2006. In December, approximately the same percentage of investors identified international tensions (52 percent) and the federal budget deficit (48 percent) as major worries as pointed to energy prices.

The Personal Dimension, which measures people's optimism about their own portfolios over the next 12 months, increased one point to 69 in December - up 15 points since August (54). The Economic Dimension, which measures people's optimism about the economy over the next 12 months, decreased four points in December and now stands at 21, down from 25 in November but far above the -1 of August. This suggests that investors as a whole have gone from being essentially neutral on the economy this past summer to being somewhat optimistic about the economic outlook over the next 12 months as 2006 comes to a close.

These findings are part of the 105th Index of Investor Optimism, which was conducted December 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 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.

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 about 39% of its employees working in the Americas, 36% in Switzerland, 16% in the rest of Europe and 9% in Asia Pacific. UBS's financial businesses employ around 75,000 people around the world. Its shares are listed on the SWX Swiss Stock Exchange, the New York Stock Exchange (NYSE) and the Tokyo Stock Exchange (TSE).


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

month

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

December

90

79

79

104

52

88

106

174

141

151

November

93

50

69

93

41

84

130

148

125

October

79

47

62

69

29

86

132

139

124

September

74

34

74

54

60

50

147

160

147

151

August

53

61

77

61

52

76

160

149

July

55

58

88

54

46

74

143

166

June

58

54

95

77

72

85

149

146

160

152

May

64

50

71

42

90

90

155

163

April

63

52

73

66

89

81

140

168

March

79

74

85

5

121

82

150

151

161

February

80

82

97

9

92

77

168

167

158

January

93

76

108

38

115

96

178


New York, December 22, 2006
UBS