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Investor Optimism ticks downward, according to UBS Index

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Gas and Energy Prices Seen as Biggest Detriment to Investment Climate. More than Four in 10 Investor Households Suffer Financial Hardship Due to Increased Gas Prices

NEW YORK, May 24, 2004 -- Optimism dropped slightly this month, with decreased optimism about the stock market's performance, according to the UBS Index of Investor OptimismĀ®, a joint effort of UBS and the Gallup Organization.

Currently at 71, the overall Index fell 2 points this month, down from 73 in April. Conducted monthly, the Index had a baseline of 124 when it was established in 1996.

The drop can be attributed to a 2-point decrease in the Index's economic dimension, which measures investors; sentiment on economic growth, unemployment, stock market performance and inflation. Of those surveyed:

  • 54 percent remain optimistic on prospects for economic growth, unchanged from last month and up 8 points from a year ago;

  • 47 percent are optimistic on unemployment, up 4 points from last month and up 14 points from a year ago;

  • 51 percent report they are optimistic about the stock market's performance, down 4 points from last month and up 6 points from a year ago;

  • 40 percent remain optimistic about inflation, up 2 points from last month and down 2 points from a year ago.

The Index's personal dimension, which measures investors' confidence in their ability to reach investment targets and maintain income, remained unchanged at 57 this month. Of those surveyed, 55 percent expressed confidence in their ability to achieve investment targets during the next 12 months, down slightly from 57 percent last month. Average expectations for return during the next 12 months fell slightly to 10 percent from 10.4 percent in April, and 64 percent of investors surveyed believe now is a good time to invest in the financial markets, down 2 points from last month.

According to the Index, 55 percent consider the economy to be in either a sustained expansion or recovery, compared with 59 percent last month. Conversely, 44 percent believe the economy is either in a slowdown or recession, compared with 40 percent last month. Of those who believe the economy is in a slowdown or recession, 62 percent believe it will be at least two years before the U.S. economy is on the way to recovery, up from 51 percent last month.

This month, investors were asked about factors affecting the investment climate. The majority, 70 percent, cites energy prices as hurting the markets a great deal. This is followed by the issue of the outsourcing of jobs to foreign countries, 60 percent; the current situation in Iraq, 53 percent; the federal budget deficit, 51 percent; and questionable accounting practices in business, 50 percent.

For the first time, investors were polled about rising gasoline prices. When asked if the recent increases caused financial hardship to them or their household, 43 percent of investors said yes, with 76 percent of those investors describing the hardship as great or moderate.

Further, the average price per gallon investors reported paying for gas was $1.92. They predict that in six months' time, the price will bump up, on average, to $2.08. Interestingly, the majority of investors surveyed, 56 percent, believe the increase represents a more permanent change rather than a temporary fluctuation in prices.

These findings are part of the 73rd Index of Investor Optimism, which was conducted May 1 to May 16. 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 806 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 the world's leading wealth management business. In the U.S., it is the third largest private client business with a client base of more than 2 million investors. Its American network of more than 7,700 financial advisors manages roughly 634 billion Swiss francs in invested assets and provides sophisticated services through consultative relationships with affluent and high net worth clients. In Switzerland and internationally, UBS has more than 140 years of private banking experience, an extensive global network of 164 offices and nearly 701 billion Swiss francs in invested assets. More than 3,200 client advisors provide a comprehensive range of services customized for wealthy individuals, ranging from asset management to estate planning and from corporate finance to art banking.

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

UBS Index of Investor Optimism overall trend

04 May 71
04 April 73
04 March 85
04 February 97
04 January 108
03 December 104
03 November 93
03 October 69
03 September 54
03 August 61
03 July 54
03 June 77
03 May 42
03 April 66
03 March 5
03 February 9
03 January 38
02 December 52
02 November 41
02 October 29
02 September 60
02 August 52
02 July 46
02 June 72
02 May 90
02 April 89
02 March 121
02 February 92
02 January 115
01 December 88
01 November 84
01 October 86
01 September 50
01 August 76
01 July 74
01 June 85
01 May 90
01 April 81
01 March 82
01 February 77
01 January 96
00 December 106
00 November 130
00 October 132
00 September 147
00 August 160
00 July 143
00 June 149
00 May 155
00 April 140
00 March 150
00 February 168
00 January 178
99 December 174
99 November 148
99 October 139
99 September 160
99 August 149
99 July 166
99 June 146
99 May 163
99 April 168
99 March 151
99 February 167
98 December 141
98 September 147
98 June 160
98 March 161
97 December 151
97 September 151
97 June 152
97 February 128
96 November 125
96 October 124