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Bush's Re-Election: Good for the Investment Climate?

Bush's Re-Election: Good for the Investment Climate?

Index of Investor Optimism shows modest increase

by Dennis Jacobe

GALLUP NEWS SERVICE

PRINCETON, NJ -- More than 9 in 10 investors voted in the presidential election, according to the UBS/Gallup Index of Investor Optimism survey conducted Nov. 3-14. As expected, they favored President George W. Bush over Sen. John Kerry, by 52% to 41% -- a margin of 11 percentage points. By comparison, in the September survey, investors gave Bush a 14-point advantage (50% to 36%).

Given the pro-investor tax policies and pro-business orientation of the Bush administration, why weren't investors more overwhelmingly in favor of Bush? And why aren't they more optimistic about the months ahead? This new investor poll provides some significant new insights.

Effect of the Election on the Investment Climate

One reason investors are less enthusiastic about the president's re-election than might otherwise be expected has to do with investor perceptions of the election's impact on the investment climate and the economy. Just 49% of the investors polled believe the election results will have a positive overall effect on the U.S. investment climate, while 25% say the election results will have a negative effect, and 22% say they will have no effect. Similarly, while 47% of investors say the election results will have a positive effect on the economy, another 35% believe they will have a negative effect -- a margin of just 12 percentage points.

Top Five Factors Hurting the Investment Climate a Lot

As has been the case for a number of months, the price of energy is most widely viewed as a significant problem by investors, with 62% saying it is hurting the investment climate "a lot." Job outsourcing is second, with 57% of investors saying the same: it is hurting the current investment climate a lot. Concern about the federal budget deficit is next at 49%, followed by the situation in Iraq at 46%, and questionable accounting practices at 45%.

Impact of Election on Top Five Factors

Somewhat surprisingly, more investors think the election results will have a negative effect on these five top problems facing the investment climate than believe the election will have a positive effect. Forty-nine percent of investors think the election will have a negative effect on the price of energy (including gas and oil) while 27% say it will have a positive effect. Similarly, by a margin of 46% to 18%, investors say the election will have a negative, rather than a positive, impact on job outsourcing. The rest of the top five problems include the federal budget deficit, with a negative margin of 54% to 23%; Iraq, with a negative margin of 44% to 37%; and accounting issues, at 40% negative to 23% positive.

Investor Optimism Increases Slightly

Even as the stock market surged during the first half of November following the election, the Index of Investor Optimism showed only a modest increase, from 62 to 69. This slight improvement leaves investor optimism below where it was in September and at its second lowest point in the past 12 months. The Index stood at 93 last November.

The Personal Dimension increased to 53 in November -- up just 1 point from October and 14 points below its level of a year ago. The Economic Dimension increased 6 points and now stands at 16 -- 10 points below where it was a year ago.

Why Aren't Investors More Optimistic?

Obviously, investors recognize that Bush's re-election is good for the stock market and probably for the tax burden they will bear. As a result, they are more optimistic about the stock market now than they were before the election. November's poll reflects this increase in investor confidence in the stock market, as does the surge in the Dow following the election.

On the other hand, many investors also seem to believe that the president's re-election is actually going to do more harm than good in their areas of greatest concern. This suggests that investors may not only be anticipating a continuation of the administration's current economic policies in these areas, but just possibly, an intensification of those policies. Such negative expectations provide little reason for increased investor optimism.

The past couple of years have been good for the stock market, interest rates, and housing. They have not been very good in terms of jobs and employee incomes. Perhaps it is not so surprising that Bush's re-election has many investors expecting to see more of the same in the months ahead.

Survey Methods

Results for the Index of Investor Optimism -- U.S. are based on telephone interviews with a randomly selected U.S. sample of 805 adult investors, aged 18 and older, with at least $10,000 of investable assets, conducted Nov. 3-14, 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.


Gallup https://news.gallup.com/poll/14110/Bushs-ReElection-Good-Investment-Climate.aspx
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