Why Are So Many Investors Uncommitted in Presidential Election?

GALLUP NEWS SERVICE

PRINCETON, NJ -- Ninety-seven percent of investors say they plan to vote in the presidential election this November, according to the September UBS/Gallup Index of Investor Optimism survey. Taken at face value, this would appear to be good news for George W. Bush: his Wall Street constituency needs no urging to get out the vote.

On the other hand, the poll also shows that investors are not nearly as strongly in Bush's camp as most Wall Street and political pundits would have us believe. Only 50% of investors say they'll vote for Bush, while 36% say they'll vote for John Kerry. Thirteen percent express no opinion and 1% say they'll vote for someone else.

Clearly, the president has a substantial lead among investors, but there are still a surprisingly large number who remain uncommitted in this presidential election. In fact, when asked whether they would be "upset" if their candidate did not get elected, only 37% of investors said they would be upset if Bush did not win and 30% said they would be upset if Kerry did not win. Amazingly, one-third of the nation's investors do not seem to care a great deal one way or the other which candidate wins (19% would not be upset if their favored candidate didn't win and 13% have no opinion on the matter).

Why do so many investors seem relatively unconcerned about who is elected president? Why aren't investors overwhelmingly supporting Bush for re-election? If they aren't supporting Bush, why aren't more investors supporting Kerry? A look at the Index of Investor Optimism survey provides some perspective on these issues.

Investor Approval of the President's Job Performance

Overall, Bush's job approval among investors is 55%. This is three percentage points higher than his approval among the general public.

Investors are most positive about the president's handling of the war on terrorism, with 65% saying they approve and only 32% saying they disapprove. More investors also approve (54%) than disapprove (41%) of the way Bush is handling education.

However, investors are just about evenly divided over the president's handling of the economy, foreign affairs, and the situation in Iraq. By 50% to 47%, investors approve of Bush's handling of both the economy and foreign affairs. As far as Iraq is concerned, 51% approve and 48% disapprove.

Effect of the Presidential Election on the Investment Climate

Only one in five investors think that uncertainty over the presidential election is currently "hurting the investment climate a lot." Still, when given a choice between the two candidates, 48% of investors feel a Bush win will be positive for the investment climate, while 29% feel a Kerry win will be positive.

Last month, investors were more evenly divided on this question, with 41% favoring Bush and 36% favoring Kerry. This change in investor sentiment mirrors the change that has taken place in the overall electorate, as Gallup Polls show Bush moving from a slight lead among likely voters in August to a significant lead in September.

Factors Hurting the Investment Climate a Lot

Currently, 56% of investors say that both the price of energy (including gas and oil) and job outsourcing are hurting the current investment climate "a lot." This is the highest percentage attributed to any of the 11 factors offered to investors as possible sources of damage.

Concerns about Iraq are next at 50%, followed by concerns about the federal budget deficit at 47%, and questionable accounting practices at 43%.

Investor Optimism Continues to Decline

The Index of Investor Optimism declined for the third month in a row in September, and now stands at its lowest level in four months, at 74. The Index has fallen 21 points since June -- including 3 points in September -- and is now 34 points below its January level of 108.

The Personal Dimension fell 5 points in September to 57, and is currently 15 points below where it was in January. The Economic Dimension increased 2 points in September to 17, and is currently 19 points below where it was in January.

Key Investor Concerns Are Being Ignored

Like most Americans, investors tend to vote their pocketbooks. Given the way many investors have benefited from the stock market, tax cuts, and the economic recovery during the past couple of years, one might reasonably assume that most investors would be voting for Bush in November.

However, this ignores another economic reality. Oil prices are approaching $50 a barrel. Consumers' income expectations are declining, as are their spending intentions. Many businesses seem unlikely to make their earnings projections. Many signs suggest that the economy is getting weaker, rather than stronger. As a result, investor optimism has not only fallen for three consecutive months but now stands at about half its level of four years ago.

Further, such top investor concerns as surging energy prices, job outsourcing, and the federal budget deficit don't appear to be anywhere on the political radar screen. This may change in the weeks ahead as the presidential debates get underway on Thursday, but for now the economy seems to be taking a back seat to international issues in the political arena.

This lack of focus on the major economic issues of the day doesn't offer investors who are concerned about these issues much reason to choose one candidate over the other. Will the outlook for energy prices, jobs, and consumer incomes improve if one political candidate, as opposed to the other, is elected? Will the overall economic outlook for the first half of 2005 be better under Bush than it would be under Kerry, or vice versa? The candidate who provides the best answers to these questions is likely to pick up a substantial number of uncommitted investor votes in November.

Survey Methods

Results for the Index of Investor Optimism -- U.S. are based on telephone interviews with a randomly selected U.S. sample of 809 adult investors, aged 18 and older, with at least $10,000 of investable assets, conducted Sept. 1-19, 2004. For results based on this sample, one can say with 95% confidence that the maximum error attributable to sampling and other random effects is ±4 percentage points. 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.