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Index of Investor Optimism
INVESTOR OPTIMISM UP SLIGHTLY FOR DECEMBER Investors Remain Pessimistic about the U.S. Economy; Worries over High Energy Prices and Residential Real Estate Continue
Investor optimism gained slightly in December rising 6 points to a level of 50 according to the UBS/Gallup Index of Investor Optimism. This marks the 2nd lowest level for the Index this year and is 40 points below that of December 2006. The Index is conducted monthly and had a baseline score of 124 when it was established in October 1996.
Most of the improvement in December's Index can be found in the Economic Dimension of the Index, which measures investors' feelings about the direction of the overall US economy. The Economic Dimension increased 5 points from -12 in November to -7 in December. Despite this uptick, 78 percent of investors describe the current U.S. economy as being in a slowdown or recession - essentially unchanged from the 79% who felt this way in November and up from 68 percent who felt this way in October.
Investor sentiment towards their own investments remained basically unchanged with the Personal Dimension of the Index, which measures Investors' optimism about their individual investment portfolios, increasing 1 point to 57 from its level of 56 in November.
"The Fed's latest efforts have helped prevent an outright recession, but only time will tell if the deteriorating housing market deals the economy a lethal blow," said Maury Harris, Chief US Economist, UBS Investment Bank.
Energy prices continue to plague investors with 75 percent saying they believe energy prices are hurting the current investment climate "a lot," up 15 points from the 60 percent who felt this way in October.
Housing and real estate remain second only to energy prices as an investor concern, with 62 percent of investors saying 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 56 percent who felt this way in November and the highest level of concern voiced by investors about this area since measurement began in October 2005.
Investor skepticism towards the housing and real estate markets continues with 78 percent of investors saying they believe economic conditions in the national residential real estate market are getting worse not better. Those polled cited feeling the effects of the credit crunch with 53 percent of investors saying the consumer credit crunch is hurting the investment climate "a lot." In addition, 67 percent feel it is harder for Americans to get credit now than it was three months ago.
These findings are part of the 117th Index of Investor Optimism, which was conducted December 1-16, 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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