Optimism among U.S. investors plunged in July according to the latest UBS Index of Investor Optimism.

The index fell to 54, down 23 points from June when it sat at 77. The index, which is a joint effort of UBS and the Gallup Organization, had a baseline of 124 when it was established in 1996.

Investors expressed concerns about unemployment and the prospects for the financial markets in July. For the month, 50% of investors say they are confident about the outlook for economic growth over the next 12 months, nearly unchanged from June. However, just 34% of investors say they are optimistic about the job market, down from 39% last month. Moreover, half of those surveyed express optimism about the performance of the stock market in the coming year, compared with 57% in June.

Expectations for short-term return, over the next 12 months, moderated in July following a large increase last month. Investors now expect an average 8.6% return on their personal portfolios in the next year, down from 11.9% last month.

The proportion of investors saying now is a good time to invest in the markets also declined. As did the share of investors who say they believe the stock market will be somewhat or much higher a year from now.

When asked how long it will be before the Dow Jones Industrial Average reaches the 11,000 mark achieved in June 2001, 47% say they believe it will reach this level within the next two years. Another 19% of those surveyed predict the DJIA will hit 11,000 within the next three years. More than a quarter of those surveyed, 27%, believe it will take more than three years to reach 11,000, while 5% say it will never reach that level again.

Among those surveyed, 41% say they believe the U.S. economy is experiencing a recovery, up from 32% in January 2003, when investors were last polled on the subject. This compares with 32% who believe the economy is in a slowdown, and 21% who say it is in recession.

The survey was conducted from July 1 to July 17. The sampling error in the results is plus or minus three percentage points.