GALLUP NEWS SERVICE
PRINCETON, NJ -- Investor optimism increased slightly in August,
according to the Index of Investor Optimism, a joint effort of UBS
and The Gallup Organization. The Index is now at 52 -- up modestly
from last month's all-time low of 46, but still at its third lowest
level since its inception in 1996. In comparison, the Index was at
50 in September 2001.
The lack of optimism is somewhat surprising, given the roughly
1,000-point increase in the Dow over the past month. How can
investors be so unenthusiastic, now that the Dow weekly average has
increased for five straight weeks? The answer is that substantial
investors -- those who have $100,000 or more invested -- are much
more optimistic about the future than are other investors,
particularly regarding the overall outlook for the U.S.
economy.
Evidently, the average American doesn't yet see the strength in
the economy that the nation's better-off investors see. Presumably,
it is this perceived strength in the economy that the improving Dow
currently reflects. On the other hand, it may just be that the
Dow's recent increases, in and of themselves, have turned
substantial investors more optimistic about the economy. This makes
sense -- substantial investors have more at risk and thus, more to
gain, when the equity markets improve. It also suggests that the
overall index may be more predictive of the economic outlook right
now than the substantial investor index.
Overall Investor Optimism Stabilizes
Overall investor optimism fell from 121 in March to 89 in April
and 90 in May. In June, it fell again to 72, and in July it
declined once more to 46. As a result, the slight August increase
in the overall index to 52 suggests a much needed stabilization of
investor sentiment.
While the overall index increased a little, the personal
dimension of the Index also stabilized -- but with a modest
decrease from 48 in July to 46 in August. From an economic outlook
perspective, this is probably the most troubling aspect of the
August results. Investor perceptions along the personal dimension
remain at all-time lows.
The economic dimension increased modestly, going from a –2
in July to a +6 in August. While the August result is far below the
41 it was at in March 2002, it is also much better than the
–11 of September 2001.
Index of Investor Optimism -- U.S.
October 1996 to August 2002 |
 |
Substantial Investor Optimism Improves
Overall substantial investor optimism fell from 155 in March to
111 in April and 101 in May. In June, it fell again to 90 before
plunging to its lowest level ever at 49 in July -- its previous low
was 54 in September 2001. In August, the overall substantial
investor index increased 22 points to 71.
Importantly, substantial investor optimism increased along both
the personal and the economic dimensions. The personal dimension of
the substantial investor index increased 6 points, going from 51 in
July to 57 in August. The economic dimension of the substantial
investor index increased 16 points from –2 in July to +14 in
August.
Index of Substantial Investor Optimism --
U.S.
Among Substantial Investors Only |
 |
Experienced Investors Are More Optimistic
In August, the overall index for new investors -- those with
five or fewer years of experience -- fell to 42, its all-time low.
The previous low for new investors was in November 2001 when it
reached 70. While new investor optimism fell sharply in August, the
overall index for investors with six to 20 years of experience
increased slightly, from 39 in July to 43 in August. And,
reflecting the greater investment experience of substantial
investors, the overall index for investors with 21 or more years of
experience increased from 41 in July to 79 in August.
Index of Investor Optimism:
By Experience of Investor |
 |
Older Investors Are Still Less Optimistic
The overall index for investors 40 years of age or older is at
46 in August -- up from 36 in July but down from 121 in March.
Still, it remains below its September 2001 low of 48.
In sharp contrast, the index for investors 40 years of age or
younger is at 74 in August -- down from 81 in July. It is down from
129 in March, but remains well above its September 2001 low of 62.
While older investor optimism is improving slightly and younger
investor optimism is still declining, older investors remain less
optimistic than their younger counterparts.
Index of Investor Optimism:
By Age of Investor |
 |
Survey Methods
Results are based on telephone interviews with 1,012 investors,
aged 18+, conducted August 1 – 15, 2002. For results based on
the total sample of investors, one can say with 95% confidence that
the margin of sampling error is ± 3 percentage points.
