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Index of Investor Optimism
INVESTOR OPTIMISM DECLINES SLIGHTLY IN JUNE Energy Prices Continue to Top Investor Concerns Residential Real Estate Market Still Shows No Sign of Reaching Bottom
Investor optimism fell six points in June and now stands at 89 according to the UBS/Gallup Index of Investor Optimism. Despite this drop, the Index remains above its levels of 74 for April and 78 for March 2007. The Index is conducted monthly and had a baseline score of 124 when it was established in October 1996.
Rising energy prices continue to be the top concern among U.S. investors, with nearly three in four (73 percent) saying that they believe energy prices are hurting the current investment climate "a lot." This is down three points from 76 percent who felt this way in May. Still, investor concerns over energy remain well above the 63 percent in March and 58 percent in February who held this sentiment.
On average, investors report paying $3.11 for a gallon of gas during the first half of June and expect gas prices to increase to an average price of $3.38 a gallon over the next three months. Because of the high prices consumers are currently paying for gas and expectations for higher prices in the months ahead, 51 percent of investors say they plan to cut back on their driving this summer. In addition to curtailing road travel, 45 percent say they plan to cut back on their vacations, 37 percent plan to reduce their use of air conditioning or fans, and 61 percent expect to cut back on other spending in general.
Investors continue to be concerned over the softening real-estate market, with 71 percent saying that they believe conditions in the residential real estate market nationwide are getting worse, not better. This is approximately the same as the 73 percent who responded this way in May. Similarly, 58 percent of investors say conditions in their local community's residential real estate market are getting worse, not getting better.
"As the summer driving season gets started, investors are clearly noticing the impact of higher gas prices on their bottom line, which in turn affects sentiment about their investments," said Maury Harris, Chief U.S. Economist, UBS Investment Bank.
In June's poll, investors also indicated that one of their greatest concerns is international tensions such as those related to the Middle East and North Korea. This month, 56 percent of investors pointed to international tensions as hurting the investment climate 'a lot.' This is an increase from the 53 percent who felt that way last month. The issue of illegal immigration is also weighing more heavily on investors' minds with 45 percent citing illegal immigration as hurting the investment climate "a lot," up from 38 percent in May.
The decline in optimism for June can also be attributed to a drop in investor sentiment towards personal investments. The Personal Dimension of the Index, which measures optimism about investors' own personal investment portfolios, decreased eight points in June to 67 from 75 in May. In sharp contrast, the Economic Dimension of the Index, which measures investor optimism about the future of the overall U.S. economy over the next 12 months, increased two points in June to 22.
These findings are part of the 111th Index of Investor Optimism, which was conducted June 1-17, 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 805 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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