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Investor Optimism reaches highest level in three years
Over One-Third of Investors Expect Stock Market to Reach New Record Level in '07 Investors Less Pessimistic about Residential Real Estate Outlook
Investor optimism soared to its highest level since 2004 reaching 103 for the month of January. This is a jump of 13 points from last month's level of 90 and only the fifth time the Index has been above 100 since December 2000. The Index is conducted monthly and had a baseline score of 124 when it was established in October 1996.
Investors are beginning 2007 with a bullish outlook for the stock market. Thirty-seven percent of investors expect the Dow Jones Industrial Average (DJIA) to end 2007 at a higher level than its record 2006 close. Of those expecting the DJIA to end 2007 higher, 66 percent expect an increase of five to ten percent, 22 percent expect an increase of less than five percent, and 11 percent predict an increase of more than ten percent. Only 15 percent of investors expect the DJIA to end 2007 lower than its 2006 close, and 46 percent expect it to close the year at about the same level as last year.
While investor sentiment continues to suggest that residential real estate market conditions continue to deteriorate, investor perceptions are somewhat less negative than they were in previous months. Two in three investors (65 percent) believe conditions in the residential real estate market nationwide are getting worse, down slightly from the 70 percent who felt this way in November and December of last year. Similarly, 50 percent of investors say conditions in their local community's residential real estate market are getting worse, not getting better. This is a drop from 57 percent who felt this way in December.
"With inflation remaining under control, investors see the possibility of a Fed interest rate cut during 2007 and therefore believe the slide in the real estate market may be coming to an end. The continued rally in the stock market has also improved investors' outlook for their own portfolios over the coming year," said Mike Ryan, Head of UBS Wealth Management Research Americas.
Despite falling oil prices and sharply lower gas prices at the pump than during much of 2006, high energy prices continued to top investor concerns in January with 57 percent saying they believe energy prices are hurting the current investment climate "a lot." This is essentially the same as the 54 percent who felt this way in November and the 55 percent who felt this way in December, but significantly lower than the 78 percent who held this view in August 2006. In December, 50 percent of investors pointed to international tensions as hurting the investment climate a lot and the same percentage pointed to the federal budget deficit as a major investor concern.
The Personal Dimension, which measures people's optimism about their own portfolios over the next 12 months, jumped four points to 73 in January - the highest point for this dimension of the Index since March 2002 when it stood at 80. The Economic Dimension, which measures people's optimism about the economy over the next 12 months, increased nine points in January and now stands at 30, its highest level since February 2004 when it also hit 30. This suggests that investors as a whole are somewhat optimistic about the economic outlook for 2007.
These findings are part of the 106th Index of Investor Optimism, which was conducted January 2-14, 2007. 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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Additional information about the Index of Investor Optimism can be found at
NEW YORK, January 22, 2007
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