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Investor Optimism Surges in the U.S. and Europe

by Dennis Jacobe

Still, U.S. investors are much more optimistic than their European counterparts

GALLUP NEWS SERVICE

PRINCETON, NJ -- In an early January speech, Federal Reserve Board Chairman Alan Greenspan noted that the world financial markets handled the shock of Sept. 11 surprisingly well. Of course, this statement highlights the fact that the world's money markets are now so interconnected that a major event in any country has a financial impact worldwide.

In recognition of the growing need for international investor information, The Gallup Organization and UBS, the international financial services firm, launched the "Index of Investor Optimism -- EU5" in January 2002. This new index of European investor optimism combines with the "Index of Investor Optimism -- U.S." to track changes, on a comparable basis, in investor sentiment in two parts of the world. Over time, these two indices should provide many new insights into both the similarities and differences in investor opinions in the U.S. and Europe.

In the immediate term, the results of the two indices show that investor optimism is much higher in the U.S. than in Europe. More importantly, the indices reveal that over the past quarter, investor optimism has surged in both the U.S. and Europe.

Trend in Investor Optimism

During October 2001, an Index of Investor Optimism baseline survey was conducted in five countries in Europe: France, Germany, Great Britain, Italy, and Spain. As a result of this survey, the baseline for the Index of Investor Optimism -- EU5 was established at a score of 4. The baseline for the personal dimension at this time was 33, and the economic dimension was -29. For the same month, the Index of Investor Optimism -- U.S. was at 86, the personal dimension at 76, and the economic dimension at 10.

In January 2002, the Index of Investor Optimism -- EU5 registered 36 points higher than its October 2001 level, reaching 40. Over this same time period, the U.S. Index increased 29 points, going from 86 in October 2001 to 115 in January 2002. This is the U.S. Index's highest level in more than a year -- it stood at 130 in November 2000.

The biggest jump in the U.S. Index came in the economic dimension, which rose from 12 points in December 2001 to 30 in January 2002. This is this dimension's highest level since November 2000, when it stood at 40. The personal dimension of the U.S. Index increased to 85 in January -- up nine points -- also placing it at its highest level in more than a year.

As was the case in the United States, the biggest part of the increase in the European Index came in the economic dimension, which increased from -29 in October 2001 to –4 in January 2002. The personal dimension of the EU5 Index increased to 44 points in January -- up 11 points from October 2001.

Index of Investor Optimism –
U.S. & EU5 Oct 2001
Index of Investor Optimism –
U.S. & EU5 Jan 2002

More U.S. Investors Say it is a Good Time to Invest

For most of the past several years, two-thirds or more of American investors have said that it is a good time to invest. Neither the events of Sept.11 nor the disappointing investment performance of 2001 have changed those views.

In January 2002, nearly three out of four (72%) U.S. investors said that it is a good time to invest. This was up slightly from December when 69% of U.S. investors said it was a good time to invest, but about the same percentage as in October 2001. While investor optimism surged in January, the percentage of investors saying it is a good time to invest remained high, but did not increase. The percentage of investors saying now is a good time to invest reached a high of 78% in February 2000 and a low of 52% in September 2001.

Probably reflecting the much lower level of investor optimism in Europe, less than half (44%) of European investors said that now was a good time to invest in the financial markets. And, despite the January surge in European investor optimism, this percentage remains at about the same level (46%) it was in October 2001.

Good Time to Invest in the Financial Markets?
Jan 2002

Survey Methods

Results for the Gallup/UBS "Index of Investor Optimism -- U.S." are based on telephone interviews with a randomly selected U.S. sample of 1,001 adult investors, 18 years and older, with at least $10,000 of investable assets, conducted Jan. 1-15, 2002. Results for the Gallup/UBS "Index of Investor Optimism -- EU5" are based on randomly selected samples of approximately 200 investors each in France, Germany, Great Britain, Italy, and Spain conducted Jan. 2-22, 2002.

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.

Gallup


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