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Investor Optimism declines, according to UBS Index
Six in Ten Investors Expect Income Tax Refund. Three in Four Investors Say Rise in Gas Prices Permanent; Four in Ten Feeling Pinch
Investor optimism declined this month, with investors less positive about economic growth, inflation, and the stock market, according to the UBS Index of Investor Optimism, a joint effort of UBS and the Gallup Organization.
The Index is now at 74, eight points lower than last month, and two points lower than it was in January. Conducted monthly, the Index had an initial baseline of 124 when it was established in 1996.
The increase can be attributed to 10-point drop in the Index's economic dimension, offset somewhat by a two-point gain in the personal dimension.
Currently at 10, the economic dimension is at the same level it was last October, the lowest it had been since June 2003. The decline comes as investors see rising gas prices becoming permanent, and express greater worries about inflation as well as the economy. The recent decline in the stock market appears to have added to their concerns.
The slight gain in the personal dimension comes from greater optimism about maintaining personal income; however, investors are less optimistic about reaching long-term investment goals.
Despite the Index's decline, the survey shows little change in investors' expectations for return on their investments over the next year. The average expected return is 10.3 percent, essentially the same as last month when it was 10.1 percent.
Investors are only a little less likely this month than they were in February to say that now is a good time to invest in the markets. Sixty percent of investors express this view now, compared with 62 percent last month. Still, it is higher than the 53 percent measured last October.
This month, investors were also polled about gas prices and their income tax returns. The poll shows 93 percent of all investors expect to meet the April 15 deadline for filing their tax returns, with only 4 percent saying they will take an extension. Almost two in three, 62 percent, expect a refund, with the median amount between $1,000 and $2,000. Almost a quarter of investors, 23 percent, expect refunds of $3,000 or more, including 10 percent expecting more than $5,000.
Most investors will not save or invest their refunds, but instead will spend the money either on their routine bills (32 percent) or on some special purchase (21 percent). Thirty-one percent say they will put the money in a savings account, and another 8 percent say they will invest the money.
The poll also finds that four in ten investors say they are already feeling the pinch of higher gas prices, including 30 percent who say it is at least a moderate hardship. Moreover, 77 percent of investors say the higher prices represent a permanent change, while just 21 percent say the recent increases are just part of a temporary fluctuation.
This is a more pessimistic view than what investors expressed in May 2004. At that time, just 56 percent thought the higher prices were permanent, while 44 percent expected them to be temporary.
When asked specifically about the level of gas prices, investors estimate current prices at an average of $1.98 per gallon, and that six months from now the price will probably be about $2.21 per gallon. Again, this is more pessimistic than what investors said last year. In August 2004, when the average price was estimated at $1.86 per gallon, investors projected that the price would go up in the next six months by only four cents, to 1.90 per gallon.
These findings are part of the 83rd Index of Investor Optimism, which was conducted March 1 to March 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 802 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 a leading financial firm, combining financial strength with a reputation for innovation and a global culture that embraces change.
UBS is one of the world's largest wealth managers, a premier investment banking and securities firm, and one of the largest global asset managers. In Switzerland, UBS is a market leader in retail and commercial banking.
Headquartered in Zurich and Basel, UBS employs around 66,000 people, and has operations in over 50 countries and in all major financial centers.
Additional information about the Index of Investor Optimism can be found at:
New York, March 28, 2005