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Investor Optimism takes a tumble
Two in Three Investors Say It Is Still a Good Time to Invest Investors Remain Concerned about Higher Gas Prices at the Pump Investors Say Residential Real Estate Conditions Are Getting Worse, Not Better
Investor optimism took a tumble in February falling back to the level it reached in December 2006, according to the UBS/Gallup Index of Investor Optimism. The Index dropped 13 points to 90, erasing all of its gains from January and bringing it back below 100, where it has generally been since December 2000. The Index is conducted monthly and had a baseline score of 124 when it was established in October 1996.
Despite sharply lower gasoline prices today compared with summer of 2006, energy prices continue to top investors' concerns. Fifty-eight percent of investors believe energy prices are hurting the investment climate "a lot," essentially the same as the fifty-seven percent who held this view in January. Investors also expect gasoline prices to increase in the coming months. Today, investors report paying an average of $2.21 per gallon of gasoline. Over the next three months, they expect the average price to increase to $2.39. Sixty-seven percent of investors said that lower gas prices have had little impact on their view of the future course of the economy.
Investor concerns about energy prices may be closely related to another area of worry. A majority of investors (54 percent) believe international tensions such as those in the Middle East, are hurting the US investment climate "a lot." This compares to 50 percent who held this view last month.
"Investors are seeing a continuing soft housing market, some signs of weaker corporate earnings and some lingering inflation pressure. These factors, along with an unsettled geopolitical environment, have contributed to their growing concerns with the investment climate," said Mike Ryan, Head of UBS Wealth Management Research US.
Real estate continues to weigh heavily on investors' minds, and their perceptions suggest that conditions are continuing to deteriorate in that sector. In February, 63 percent of investors said that they believe conditions in the residential real estate market nationwide are getting worse, about the same as the 65 percent who held this view in January. Similarly, 56 percent of respondents said that conditions in their local real estate markets are worsening, up from the 50 percent who felt this way in January.
Despite the overall drop in optimism, two-thirds of investors, 66 percent, continue to believe that now is a good time to invest in the financial markets. This has held steady from last month.
Views of the impact of the new US Congress on the investment climate in the US continue to be mixed. In February, 36 percent of investors said that the change in Congressional control from Republican to Democrat will have a positive impact on the investment climate. Thirty-two percent believe it will have a negative impact, and 30 percent think it will have no impact whatsoever. In December, shortly after the election, investors held similar views, with 38 percent believing the change in control would be positive, 28 percent negative and 30 percent expecting no impact on the investment climate.
The Personal Dimension, which measures people's optimism about their own portfolios over the next 12 months, fell six points to 67 in February from its January number of 73. The Economic Dimension, which measures people's optimism about the economy over the next 12 months, dropped seven points in February to 23 from January's 30. Investors remain optimistic about the economic outlook for the next 12 months but are less so than they were in January 2007.
These findings are part of the 107th Index of Investor Optimism, which was conducted February 1-15, 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, February 26, 2007
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