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Index of Investor Optimism
INVESTOR OPTIMISM REMAINS DOWN IN NOVEMBER Investors Pessimistic about the Economy; Worries Surge about the Dollar, Energy Prices and Housing Market
Investor optimism plummeted in November, falling 26
points to 44, less than half its level of 103 in January and the lowest point since Hurricane
Katrina in September, 2005, according to the UBS/Gallup Index of Investor Optimism. The
Index is conducted monthly and had a baseline score of 124 when it was established in
The majority of the decline in sentiment this month can be attributed to the Economic Dimension of the Index, which measures investors' feelings about the US economy. The Economic Dimension plunged 20 points in November to -12, indicating that investors went from being somewhat optimistic about the US economy in October to somewhat pessimistic in November.
The Personal Dimension of the Index, which measures Investors' optimism about their individual investment portfolios, also dropped in November, tumbling 6 points to 56. This is the lowest point for investor optimism regarding their own portfolios since August 2006 when the Personal Dimension stood at 54.
Seventy-nine percent of investors describe the current US economy as being in a slowdown or recession - up from 68 percent who felt this way in October. These concerns may bleed into holiday spending with 30 percent of investors saying they plan to spend less on Christmas gifts this year than last.
The declining value of the US dollar also contributed to the sharp drop in the Index with 47 percent of investors saying that they believe the value of the dollar is hurting the current investment climate "a lot." This is up eight percentage points from the 39 percent who felt this way in October and is the highest level of investor concern about the dollar registered by this poll since tracking began in March 2004.
"The current slump in the economy will not right itself until we see an ease in the consumer credit crunch and some substantial improvement in the housing sector, "said Maury Harris, Chief US Economist, UBS Investment Bank.
Surging energy prices continue to top the list of investor concerns. With current oil prices exceeding $90 a barrel and gas prices at the pump exceeding $3 a gallon, concerns about higher energy prices jumped 11 percentage points in November with 71 percent of investors saying they believe energy prices are hurting the current investment climate "a lot."
Housing and real estate worries remain second only to energy prices as a concern with 56 percent of investors saying that they believe the potential "for a housing or real estate crash in some local markets" is hurting the investment climate "a lot." This is up from the 51 percent who felt this way in October and the highest level of concern voiced by investors about this area since measurement began in October 2005. Investors continue to see no bottom in sight for the national housing and real estate markets with 80 percent saying they believe national real estate conditions are getting worse not better.
The credit crunch continues to squeeze consumers with 64 percent saying it is harder for Americans to get credit now than it was three months ago, and 47 percent of investors saying the consumer crunch is hurting the investment climate "a lot."
These findings are part of the 116th Index of Investor Optimism, which was conducted November 1-14, 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 804 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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