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Investor Optimism Plummets to Record Low in October, According to UBS Index

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Investors Cite War on Terrorism, Economy, Iraq as Most Important Issues in Upcoming Elections

Overall optimism fell dramatically in October to an all-time low as investors expressed increased concern over the prospects for the economy and the financial markets in the coming year, according to the Index of Investor OptimismĀ®, a joint effort of UBS and the Gallup Organization.

Currently at 29, the overall Index decreased 31 points from 60 in September. Conducted monthly, the Index had a baseline of 124 when it was established in 1996.

For the first time in the survey's history, less than half of investors, 48 percent, say now is a good time to invest in the markets. However, among substantial investors, those with more than $100,000 in investable assets, 58 percent view the current environment as a buying opportunity, compared with 43 percent among average investors, those with $10,000 - $100,000 in investable assets.

In October, 38 percent of investors report they are optimistic about the prospects for economic growth over the next 12 months, down from 49 percent last month, and matching a record low reached in September 2001. Moreover, just 33 percent of those surveyed say they are confident about the performance of the stock market in the coming year, compared with 38 percent one month ago.

Expectations for short-term return, over the next 12 months, increased slightly in October to 8.1 percent from 7.6 percent last month. The modest rise in expectations can be largely attributed to the least experienced investors, those with less than five years in the markets. Among this group, short-term expectations jumped to 14.5 percent from 9.7 percent in September.

This month, the Index also polled investors about the upcoming congressional elections and the public policy issues that will influence their votes. Notably, 81 percent of those surveyed say they will almost certainly vote this November. Among this group, 45 percent intend to vote for the Democratic candidate in their congressional district, while 50 percent say they will support the Republican candidate.

Investors are split on which political party's control of Congress they believe would be best for the investment climate. Indeed, 39 percent favor Republican control of both houses, 30 percent favor Democratic control, and 23 percent prefer one party to have a majority in the House and the other to control the Senate. Overall, more than half of those surveyed, 56 percent, say the investment climate will be affected a moderate to great deal by the results of the congressional elections, compared with 29 percent who believe the investment climate will not be impacted at all.
Perhaps not surprisingly, the nation's war on terrorism, the economy, and a possible war with Iraq top the list of the most important issues for investors this election. Among those surveyed, 78 percent say a candidate's position on the war on terrorism will be very or extremely important in influencing their vote. This is followed by the economy, 75 percent; the possibility of war with Iraq, 73 percent; health care, 69 percent; education, 67 percent; corporate corruption, 65 percent; and the federal budget, 60 percent.

Investors were additionally asked which party they feel would better deal with these key issues. Those surveyed responded as follows:




Both Equally Well

The economy




The war on terrorism




Health Care








Corporate corruption




Possibility of war with Iraq




The federal budget




These findings are part of the 54th Index of Investor Optimism, which was conducted from October 1 to October 17. To track and measure Index changes on an ongoing basis, new samplings are taken monthly. Dennis J. Jacobe, research director for Gallup, said the sampling included 1,001 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 of savings and investments. The sampling error in the results is plus or minus three percentage points.

In January 2002, UBS established the Index of Investor Optimism - EU 5, the European counterpart to the U.S. survey covering France, Germany, Great Britain, Italy and Spain. This month, 1,000 investors across these EU markets were polled from October 1 to October 16. Overall optimism registered at negative (33) in October, down from negative (24) last month.

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 AG is a leading global financial services firm with 71,000 employees worldwide, providing a wide range of services to a client base that includes affluent individuals, corporations, institutions and governments. Headquartered in Switzerland, the bank has significant operations in all of the world's major financial centers and is comprised of four business groups; UBS Warburg, UBS PaineWebber, UBS Wealth Management and Business Banking, and UBS Global Asset Management.

Additional information about the Index of Investor Optimism can be found at