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Index of Investor Optimism

New York | | Media Releases Americas

INVESTOR OPTIMISM DECLINES FOR THIRD MONTH IN A ROW High Energy Prices, Real Estate Market Conditions Dominate Investor Concerns

Investor optimism fell for the third month in a row in April, continuing a downward slide since the beginning of 2007. The Index has fallen 31 points over the past three months and now stands at 74, according to the UBS/Gallup Index of Investor Optimism. The Index is now at its lowest level since September 2006 when it also stood at 74. The Index is conducted monthly and had a baseline score of 124 when it was established in October 1996.
The recent surge in gasoline prices is one of the major reasons for the decline in investor optimism. Over the past three months, investors' concerns about energy prices have been creeping upwards. In April nearly three-quarters of investors (72 percent) said that they believe energy prices are hurting the current investment climate "a lot," up from 63 percent in March and 58 percent in February. This is the highest level of investor concern about energy prices since 78 percent of investors responded this way in August 2006 when the price of gasoline was at one of its highest points for 2006.

Investors continue to brace for increasing prices at the pump. On average, investors reported paying $2.73 for a gallon of gasoline during the first half of April, up $0.23 from what they said they were paying a month ago and $0.52 from what they were paying two months ago. In February, respondents said they expected to pay $2.39 per gallon over the subsequent three months. Investors are already paying far above that level and now expect gasoline prices to increase to an average of $3.02 a gallon over the next three months.

"Even as the equity markets reach new highs, investors are troubled by fundamental economic issues that directly impact their bottom line - energy prices and real estate. With the slowdown in real estate sales this spring, traditionally the strongest sales season, investors are particularly sensitive to these issues," said Mike Ryan, Head of UBS Wealth Management Research Americas.

The continued deterioration of the residential real estate market remains a top investor concern. In April, seven in ten investors said conditions in the residential real estate market nationwide are getting worse, not better, approximately the same as the 72 percent in March and up from the 63 percent in February who felt this way.

Investors also harbor fears about economic growth. Today, nearly two in three investors describe the current U.S. economy as being in a slowdown (54 percent) or a recession (10 percent). About one-third of investors (35 percent) view the economy as being in a sustained expansion or a recovery, a reading that has been below the 50 percent mark since February.

With increasing fuel prices and yesterday's marking of Earth Day 2007, Americans are thinking about alternative fuel sources, especially ethanol. When asked about the expanded use of ethanol in the U.S. economy, only one-quarter of investors believe increased use of ethanol will cause gasoline prices to decrease, and more than half (54 percent) believe that it will have no effect on gasoline prices. Investors are split on how they believe increased ethanol use will impact food prices, with 44 percent saying it will increase food prices and 47 percent who believe it will have no effect.

These findings are part of the 109th Index of Investor Optimism, which was conducted April 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.

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 leading global 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, 35% in Switzerland, 16% in the rest of Europe and 10% in Asia Pacific. UBS's financial businesses employ some 78,000 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

2007

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

74

63

52

73

66

89

81

140

168

March

78

79

74

85

5

121

82

150

151

161

February

90

80

82

97

9

92

77

168

167

158

January

103

93

76

108

38

115

96

178