GALLUP NEWS SERVICE
PRINCETON, NJ -- Overall investor optimism dropped 23 points this month to its lowest level ever. It now registers at 63, significantly below the level of 100 when the Gallup/UBS-PaineWebber Index of Investor Optimism was instituted in October, 1996. But an analysis of the monthly survey of 1,000 investors shows that the drop was not due to the terrorist attacks on September 11. Among the 471 investors interviewed this month before the terrorists attacks occurred, both the personal and economic dimensions of the Index hit record lows -- with scores that are essentially the same as those recorded among the 529 investors interviewed after the attacks.
Since its inception almost six years ago, the Index has remained mostly above 100. After its initial debut, the Index slipped a bit for the next two quarters, but in June, 1997, the Index surged to 119, and eventually reached highs of 184 in February 1999, and 181 in January 2000. As late as August 2000, the Index registered 174, but by July of this year it dipped below 100 for the first time in four years.
| INDEX OF INVESTOR OPTIMISM October 1996 to September 2001 |
 |
Economic Outlook Little Affected by Terrorist Attacks, but "Rally" Effect for Government Evident
In the aftermath of the terrorist attacks, American opinion exhibited a substantial "rally around the flag" (or "rally") effect. Ratings of the president and Congress reached record highs, and the public expressed widespread support for other government leaders and agencies. This rally effect is also evident among investors -- government dimension ratings and Federal Reserve Board approval ratings are all higher among those interviewed after September 11 than among those interviewed before that time. However, on measures that are more strictly economic, with no mention of the government, there is virtually no difference in investor ratings before and after the terrorist attacks.
A good example of the rally effect can be found in the approval rating of the interest-rate policy of the Federal Reserve Board, which jumped by 11 percentage points among investors interviewed after September 11, compared with the rating given by those interviewed before that date.
Overall, do you approve or disapprove of the Federal Reserve Board's current interest rate policy, or are you unsure?
|
Approve |
Disapprove |
Unsure |
|
|
Overall September |
45% |
9 |
46 |
|
Before September 11 |
39% |
11 |
50 |
|
After September 11 |
50% |
7 |
42 |
The rally effect is also evident on the governmental dimension of the Index, which was -23 among investors interviewed before the attacks and zero among those interviewed afterward. Among the three questions that constitute that dimension, the measure of investor optimism about the federal budget is most telling. Before September 11, investors expressed net pessimism by 21 percentage points -- 51% pessimistic and just 30% optimistic. After September 11, however, optimism surged by 12 points, and pessimism fell by 14 points -- yielding a net optimism of 42% to 37%. If anything, the terrorist attacks might have suggested more of a problem with the federal budget, requiring new expenditures to fight against terrorism. But investors expressed higher optimism, suggesting that their ratings were more a response to the rally effect than to the actual events.
On most of the strictly economic measures -- those with no mention of government -- no rally effect was found, but neither was there any substantial decline. The economic dimension was -4 before, and zero after September 11 -- a non-significant difference. Similarly, there is no significant difference in the expressed expectations for return on one's portfolio over the next 12 months among investors interviewed before and after the terrorist attacks.
Surge in Support for Defense Spending
The survey asked investors to indicate the relative priority that Congress and the president should give to five issues, "given the decline in the budget surplus." Among those interviewed before September 11, keeping the budget balanced came in a clear first, as 45% of investors said it should be a top priority. Prescription drug benefits for seniors and increased spending on education tied for second, each mentioned by 33%, followed by reforming Social Security (29%) and increasing defense spending (14%).
After the terrorist attacks, however, defense spending jumped to a tie for first place, along with keeping the budget balanced, each mentioned by 36% of investors as a top priority. These two were followed by education (mentioned by 30%), Social Security (28%) and drug benefits for seniors (24%).
The September events also led many investors to re-evaluate what the government should do about spending. Before the attacks, a substantial majority of investors, 57%, said the best action the federal government could take to help the economy was to decrease government spending, but after September 11, that number dropped to 36%. Investors who want government spending to remain at the same level increased from 36% to 46%, and those who want more government spending increased from 6% to 14%.
Survey Methods
The results reported here are based on telephone interviews with a randomly selected national sample of 1,000 adult investors, 18 years and older, with at least $10,000 of investable assets, conducted September 1-16, 2001. For results based on this sample, one can say with 95 percent confidence that the maximum error attributable to sampling and other random effects is plus or minus 3 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.
|
INDEX OF INVESTOR OPTIMISM |
||||
|
OVERALL |
PERSONAL |
ECONOMIC |
GOVERNMENTAL |
|
|
'01 September |
63 |
76 |
-2 |
-11 |
|
'01 August |
86 |
88 |
11 |
-13 |
|
'01 July |
82 |
81 |
15 |
-14 |
|
'01 June |
104 |
91 |
17 |
-4 |
|
'01 May |
113 |
94 |
21 |
-2 |
|
'01 April |
116 |
92 |
16 |
8 |
|
'01 March |
137 |
92 |
18 |
27 |
|
'01 February |
126 |
89 |
15 |
22 |
|
'01 January |
130 |
98 |
24 |
8 |
|
'00 December |
118 |
101 |
24 |
-7 |
|
'00 November |
156 |
105 |
41 |
10 |
|
'00 October |
150 |
102 |
44 |
4 |
|
'00 September |
157 |
104 |
56 |
-3 |
|
'00 August |
174 |
115 |
59 |
* |
|
'00 July |
140 |
111 |
46 |
-17 |
|
'00 June |
141 |
114 |
44 |
-17 |
|
'00 May |
154 |
114 |
50 |
-10 |
|
'00 April |
141 |
108 |
44 |
-11 |
|
'00 March |
151 |
109 |
51 |
-9 |
|
'00 February |
178 |
113 |
67 |
-2 |
|
'00 January |
181 |
114 |
75 |
-8 |
|
'99 December |
167 |
116 |
74 |
-23 |
|
'99 November |
132 |
103 |
55 |
-26 |
|
'99 October |
130 |
103 |
49 |
-22 |
|
'99 September |
144 |
112 |
57 |
-25 |
|
'99 August |
145 |
110 |
51 |
-16 |
|
'99 July |
171 |
115 |
65 |
-9 |
|
'99 June |
131 |
100 |
59 |
-28 |
|
'99 May |
156 |
110 |
68 |
-22 |
|
'99 April |
165 |
114 |
71 |
-20 |
|
'99 March |
145 |
108 |
57 |
-20 |
|
'99 February |
184 |
110 |
76 |
-2 |
|
'98 December |
147 |
108 |
56 |
-17 |
|
'98 September |
158 |
104 |
63 |
-9 |
|
'98 June |
162 |
105 |
71 |
-14 |
|
'98 March |
171 |
104 |
73 |
-6 |
|
'97 December |
126 |
103 |
62 |
- 39 |
|
'97 September |
141 |
101 |
62 |
- 22 |
|
'97 June |
119 |
104 |
57 |
- 42 |
|
'97 February |
87 |
97 |
43 |
- 53 |
|
'96 November |
95 |
99 |
40 |
- 44 |
|
'96 October |
100 |
95 |
41 |
- 36 |
Given the decline in the budget surplus, what priorities do you want the president and Congress to give to each of the following issues over the next several months? For each issue, please tell me if you think it should be one of the top priority issues the president and Congress should deal with, a major priority but not top priority, a minor priority, or something the president and Congress should not deal with at all. How about [read and rotate A-E]?
Reforming Social Security
|
01 Sep |
Total |
Before Sep 11 |
After Sep 11 |
|
% |
% |
% |
|
|
Top priority |
28 |
29 |
28 |
|
Major priority, but not top |
41 |
44 |
39 |
|
Minor priority |
18 |
17 |
18 |
|
President and Congress should not deal with it |
12 |
9 |
14 |
|
DK/Refused |
1 |
1 |
1 |
Increasing spending on public education
|
01 Sep |
Total |
Before Sep 11 |
After Sep 11 |
|
% |
% |
% |
|
|
Top priority |
31 |
33 |
30 |
|
Major priority, but not top |
41 |
43 |
40 |
|
Minor priority |
21 |
16 |
24 |
|
President and Congress should not deal with it |
6 |
7 |
5 |
|
DK/Refused |
1 |
1 |
1 |
Providing prescription drug benefits for seniors
|
01 Sep |
Total |
Before Sep 11 |
After Sep 11 |
|
% |
% |
% |
|
|
Top priority |
28 |
33 |
24 |
|
Major priority, but not top |
43 |
41 |
45 |
|
Minor priority |
23 |
22 |
25 |
|
President and Congress should not deal with it |
5 |
4 |
5 |
|
DK/Refused |
1 |
0 |
1 |
Keeping the budget balanced
|
01 Sep |
Total |
Before Sep 11 |
After Sep 11 |
|
% |
% |
% |
|
|
Top priority |
40 |
45 |
36 |
|
Major priority, but not top |
40 |
39 |
41 |
|
Minor priority |
17 |
13 |
20 |
|
President and Congress should not deal with it |
2 |
2 |
1 |
|
DK/Refused |
1 |
1 |
1 |
Increasing spending on defense
|
01 Sep |
Total |
Before Sep 11 |
After Sep 11 |
|
% |
% |
% |
|
|
Top priority |
26 |
14 |
36 |
|
Major priority, but not top |
40 |
33 |
46 |
|
Minor priority |
25 |
38 |
15 |
|
President and Congress should not deal with it |
8 |
14 |
2 |
|
DK/Refused |
1 |
1 |
1 |
Do you think it would be best for the economy if the federal government [(If FORM A: Read 1-3)/(If FORM B: Read 3-1)]
|
01 Sep |
Total |
Before Sep 11 |
After Sep 11 |
|
% |
% |
% |
|
|
Increases government spending |
10 |
6 |
14 |
|
Keeps gov't spending at the same level it is now |
42 |
36 |
46 |
|
Decreases gov't spending |
46 |
57 |
36 |
|
DK/Refused |
2 |
1 |
4 |
