Investor optimism took a tumble in February falling back to the level it reached in December 2006, according to the UBS/Gallup Index of Investor Optimism.
The index erased all of its gains from January. Despite sharply lower gasoline prices today compared with summer of 2006, energy prices continue to top investors’ concerns, it reported, noting that 58% of investors believe energy prices are hurting the investment climate “a lot”.
Investors also expect gasoline prices to increase in the coming months, although 67% of investors said that lower gas prices have had little impact on their view of the future course of the economy.
Investor concerns about energy prices may be closely related to another area of worry, it said, as a majority of investors (54%) believe international tensions such as those in the Middle East, are hurting the US investment climate “a lot.”
“Investors are seeing a continuing soft housing market, some signs of weaker corporate earnings and some lingering inflation pressure. These factors, along with an unsettled geopolitical environment, have contributed to their growing concerns with the investment climate,” said Mike Ryan, head of UBS Wealth Management Research US.
Real estate continues to weigh heavily on investors’ minds, and their perceptions suggest that conditions are continuing to deteriorate in that sector. In February, 63% of investors said that they believe conditions in the residential real estate market nationwide are getting worse. Similarly, 56% of respondents said that conditions in their local real estate markets are worsening.
Despite the overall drop in optimism, two-thirds of investors continue to believe that now is a good time to invest in the financial markets.
Views of the impact of the new US Congress on the investment climate in the US continue to be mixed. In February, 36% of investors said that the change in Congressional control from Republican to Democrat will have a positive impact on the investment climate, 32% believe it will have a negative impact, and 30% think it will have no impact whatsoever.
The Personal Dimension, which measures people’s optimism about their own portfolios over the next 12 months, also fell in February, UBS reported. The Economic Dimension, which measures people’s optimism about the economy over the next 12 months, dropped too. Investors remain optimistic about the economic outlook for the next 12 months but are less so than they were in January.
The survey was conducted February 1-15. 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 US$10,000 or more. The sampling error in the results is plus or minus four percentage points.
U.S. investor optimism tumbles in February
Slumping real estate markets continues to weigh heavily on investors
- By: James Langton
- February 26, 2007 February 26, 2007
- 13:10