Why the Gender Gap in Investor Optimism?

by Dennis Jacobe, PhD
Chief Economist, The Gallup Organization

In November, overall investor optimism surged to its highest level since March 2002, according to the UBS/Gallup Index of Investor Optimism*. This increase occurred even as the gender gap in investor optimism became wider than it has been at any time since the Index's inception in October 1996. As investor optimism among men reached its highest level since March 2002, investor optimism among women actually declined and now stands at about a third of men's.

In August 2000, there was no such gender gap. Male investors and female investors shared similarly optimistic views of the U.S. investment climate. Since then, women have become much less optimistic investors than men, and economic performance data have shown that this less enthusiastic view was more appropriate during the recession and recovery periods of the last three years. What will it take for women to jump on the optimism bandwagon in 2004?

Men Are Becoming More Optimistic

The Index of Investor Optimism among men increased 48 points to 129 in November. This puts male investors' optimism at its highest point since March 2002, when it was at 133. The Personal Dimension, which measures investors' opinions about their own financial situations, increased 22 points to 82 among men -- its highest point since February 2002. Men's ratings on the Economic Dimension, which measures opinions about the investment climate as a whole, more than doubled to 47 -- its highest level since March 2002.

Women Are Becoming Less Optimistic

At the same time, the Index rating among women declined in November, falling seven points to 46. The Personal Dimension fell six points to 48. The Economic Dimension remained essentially unchanged at -2, indicating that overall, women have a neutral view of the economic outlook over the next six months.

Many Women Are Not Convinced About the Recovery

In early 2002, both men and women seemed to think that an economic recovery was at hand. During March of that year, the Index was at 133 among men and 106 among women, resulting in an investor gender gap of 27 points. Unfortunately, investors of both genders were fooled -- the economic recovery of 2002 turned out to be a false start, as the economic momentum of those days was not maintained.

Looking ahead to 2004, it appears once more that the recovery from the 2001 recession is gaining momentum. This time, however, the gender gap is a record 83 points. One of the reasons for this huge gap appears to be that women simply are not convinced that the recovery will continue in 2004.

When investors were asked about the major factors hurting the current investment climate, the biggest disagreement between men and women occurred over general economic conditions. While only 47% of men said that current economic conditions are hurting the current investment climate, 74% of women held this view.

Seventy-three percent of men said that the economy was in a recovery or sustained economic expansion, while just 26% said it was in a slowdown or recession. Women saw things much differently -- just 44% said the economy was in a recovery or sustained expansion, while 54% said it was in a slowdown or recession.

Similarly, 68% of men expressed optimism about economic growth over the next 12 months, while only 42% of women did so. More importantly, men and women hold essentially opposite views on the unemployment outlook. Forty-nine percent of men said they are optimistic about the unemployment rate over the next 12 months, while 32% said they are pessimistic. In sharp contrast, 35% of women are optimistic and 48% are pessimistic.

What Will It Take to Close the Gender Gap?

Eighteen months ago, investors of both genders were fooled by the economy's inability to maintain its forward economic momentum. Right now, men seem to be much more willing than women to believe that the current economic recovery will be sustained.

The gender gap will close when the economic recovery that now seems so obvious on Wall Street becomes an economic reality on Main Street -- when U.S. companies begin hiring a significant number of new workers, and underemployment and wage compression show signs of dissipating in local communities. Evidently, many women do not see this happening right now and want to see the evidence in local -- not just national -- statistics before allowing themselves to become convinced that this is not another economic false start.

*Results for the Index of Investor Optimism -- U.S. are based on telephone interviews with a randomly selected U.S. sample of 801 adult investors, aged 18 and older, with at least $10,000 of investable assets, conducted Nov. 1-13, 2003. For results based on these samples, 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

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