Investor optimism rose for the second month in a row in October according to the UBS/Gallup Index of Investor Optimism.
The index increased to its highest level in seven months as investors are feeling more bullish on the stock market than in previous months.
In October, 53% of investors said that they are optimistic about the performance of the stock market, up from 47% who held that view in September and 42% in August.
Additionally, the percentage of investors who believe that now is a good time to invest in the financial markets has steadily increased since July and is now at 61%, compared with 57% in September and 54% in August.
Investor concerns about energy prices continued to decline in October as the percentage of investors saying they believe energy prices are hurting the investment climate “a lot” fell to 58%, down from 63% in September and 78% in August. Nearly as many investors (55%) now consider international tensions including those in the Middle East and in North Korea as hurting the current U.S. investment “a lot” as they do energy prices.
“Strong corporate earnings coupled with the easing of energy prices and reduced expectations of further Fed rate hikes have contributed to both the recent stock market rally and improved investor sentiment. As UBS expects a slowdown in the economy in early 2007, we will be watching several areas carefully, including the housing market and consumer spending,” said Mike Ryan, head of UBS Wealth Management Research Americas.
Investor expectations for a so-called “soft-landing” for the U.S. economy also increased in October as the percentage of investors saying the U.S. is experiencing a “recovery” or an “economic expansion” rose to 43% from 38% in September. Another 44% believe the economy is in a “slowdown,” while only one in ten investors feels the U.S. is in a recession.
While investors are slightly less concerned about conditions in the housing market this month than in September, most investors seem to believe that the real estate markets are going to get worse before they get better. Six in ten investors continue to rate conditions in today’s residential real estate market nationwide as “only fair” (45%) or “poor” (14%) – essentially the same as in September.
More than two-thirds of investors (68%) believe economic conditions in the residential real estate market nationwide are getting worse, a slight improvement from the 74% of investors who felt this way in September. When considering their local markets, 59% view conditions in their local markets as getting worse. This is an improvement from the 65% who felt this way last month, but still suggests that many local real estate markets have some way to go before they reach bottom.
The index also suggests that investors as a whole have gone from being essentially neutral on the economy just to months ago to being somewhat optimistic about the economic outlook over the next 12 months. The Personal Dimension of the Index, which measures people’s optimism about their own portfolios over the next 12 months, decreased a bit in October but remains substantially above its August level.
These findings are part of the 103rd Index of Investor Optimism, which was conducted October 1-15. 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. The sampling error in the results is plus or minus four percentage points.
Investor optimism rises for second-straight month: poll
Strong corporate earnings coupled with the easing of energy prices have contributed to both the recent stock market rally
- By: James Langton
- October 23, 2006 October 23, 2006
- 11:30