According to the latest version of the UBS/Gallup Index of Investor Optimism, investor optimism has surged to a 19-month high, with investors continuing to express confidence in the performance of the U.S. stock market.

The index is up 14 points from December to 93, and up 59 points since September 2005. The last time the index was this high was in June 2004, when it reached 95. Still, it remains below its baseline of 124 from when it was launched in October 1996.

UBS says that, “the continued rebound of the index over recent months appears to reflect higher stock prices, on balance (the Dow Jones Industrial Average has seen a 9% increase since mid-October 2005) and a retreat in gasoline prices from their very high peak around Labor Day.”

It notes that optimism about the performance of the U.S. stock market is up 4 percentage points from last month and 16 points from July. 58% of investors characterize the economy as being in a sustained expansion or recovery, up from 50% who expressed that view last month and just 33% last October.

Sixty-seven per cent of investors are optimistic about achieving their investment targets over the next 12 months compared with 60% in December. Investors’ longer-term outlook also improved, with 70% of investors optimistic about achieving their investment goals over the next five years (as compared with 66% in December).

In looking to 2006, almost seven in 10 investors say that healthcare costs and energy prices — the top listed issues measured in the poll — will be “extremely” important. The availability of jobs was the third major concern with 59% of investors registering it as “extremely” important. “It is interesting to note that healthcare, energy prices and jobs ranked above other issues such as the threat of terrorism and the situation in Iraq, despite the prominence of the latter issues in the news media,” it adds.

“Investors are clearly expressing renewed confidence in the economy and financial markets while keeping a watchful eye on domestic pocketbook issues,” said Mike Ryan, head of UBS Wealth Management Research.

Only 26% of investors say that conditions in the housing market will be extremely important to them in 2006 suggesting that investors do not share economists’ concerns about a housing bubble.

These findings are part of the 94th Index of Investor Optimism, which was conducted January 2 to January 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 $10,000 or more. The sampling error in the results is plus or minus four percentage points.