Economy

U.S. Investor Optimism Tumbles in June

by Dennis Jacobe, Chief Economist

Investors are optimistic about their portfolios, pessimistic about the economic outlook


PRINCETON, NJ -- The Gallup Index of Investor Optimism -- a broad measure of investor perceptions -- tumbled 20 points to -21 in June, giving up May's gain and essentially returning to where it was in April. Still, the Index has improved by 43 points from February's -64 reading -- its lowest level since its inception in October 1996.

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Portfolio Optimism Remains

Investors remain optimistic about the prospects for their personal portfolios over the next 12 months, with the Personal Dimension of the Index at 21 in June. This drops investor portfolio optimism back to April levels -- wiping out the six-point increase that took place in May -- and suggesting that, despite their concerns about the economy's direction, investors remain cautiously optimistic about the performance of their personal portfolios over the next 12 months.

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Economic Pessimism Returns

Investor optimism about the direction of the U.S. economy over the next 12 months plunged 14 points in June, as the Economic Dimension of the Index fell to -42. Investors are now as pessimistic about the economic outlook as they were in April. Still, they remain much less pessimistic than they were in February, when this dimension was at -70.

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Commentary

The sharp decline in Gallup's Index of Investor Optimism in June -- particularly the plunge in expectations for the economy -- suggests that investors may be losing some of their hopes for an immediate improvement in the U.S. economy later this year. This is consistent with the leveling off of consumers' mood over the past few weeks and the drop in the consumer sentiment index on Tuesday.

Gallup's job-market and consumer spending measures suggest that the reality on Main Street has not improved substantially over the past couple of months. Perhaps the average investor and the American consumer see the fragile nature of the current U.S. economy more clearly than do those on Wall Street.

Author's Note: Gallup's Index of Investor Optimism -- a survey of those having $10,000 or more of investable assets -- peaked at 178 in January 2000, just prior to the bursting of the dot-com bubble. Last year, the Index turned negative for the first time in its history. Before last year, the low for the Index was 5 in March 2003, reflecting investor concerns at the outset of the Iraq war.

Survey Methods

Gallup Poll Daily interviewing includes no fewer than 1,000 U.S. adults nationwide each day during 2008. The Index of Investor Optimism results are based on questions asked of 1,000 or more investors over a three-day period each month, conducted June 25-27, May 26-28, April 21-23, March 16-18, Feb. 17-19, and Jan. 16-18, 2009; and Dec. 16-18, Nov. 24-26, June 3-6, April 25-28, March 28-31, and Feb. 28-March 2, 2008. For results based on these samples, the maximum margin of sampling error is ±3 percentage point.

Results for May 2008 are based on the Gallup Panel study and are based on telephone interviews with 576 national adults, aged 18 and older, conducted May 19-21, 2008. Gallup Panel members are recruited through random selection methods. The panel is weighted so that it is demographically representative of the U.S. adult population. For results based on this sample, one can say with 95% confidence that the maximum margin of sampling error is ±5 percentage points.

For investor results prior to 2008, telephone interviews were conducted with at least 800 investors, aged 18 and older, and having at least $10,000 of investable assets. For the total sample of investors in these surveys, one can say with 95% confidence that the maximum margin of sampling error is ± 4 percentage points.

Interviews are conducted with respondents on land-line telephones (for respondents with a land-line telephone) and cellular phones (for respondents who are cell-phone only).

In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.
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